It has been about a month since the last earnings report for JetBlue Airways (JBLU). Shares have lost about 5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is JetBlue due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
JetBlue Beats on Q4 Earnings - Jan 24, 2019
The company’s earnings (excluding 5 cents from non-recurring items) of 50 cents per share surpassed the Zacks Consensus Estimate by 8 cents and increased 56.3% year over year. The bottom line was driven by the company’s prudent non-fuel cost management.
Total revenues came in at $1,968 million, which edged past the Zacks Consensus Estimate of $1,965.4 million and increased 12% year over year. Passenger revenues, which accounted for bulk of the top line (96.1%), improved 12.1% in the quarter under review. Other revenues were up 8.8%.
Operating Statistics
Capacity, measured in available seat miles, expanded 9.3% year over year. Meanwhile, traffic, measured in revenue passenger miles, grew 8.6% in the reported quarter. However, load factor (percentage of seats filled by passengers) contracted 60 basis points year over year to 82.5% as traffic growth was outpaced by capacity expansion in the three-month period.
Average fare at JetBlue during the quarter increased 6.6% to $183.62. Yield per passenger mile improved 3.2% year over year to 15.1 cents. Passenger revenue per available seat mile (PRASM: a key measure of unit revenue) increased 2.5% to 12.46 cents and operating revenue per available seat mile (RASM) inched up 2.4% to 12.98 cents.
Expenses
In the fourth quarter, total operating expenses (on a reported basis) rose 11.4% year over year mainly due to higher costs pertaining to aircraft fuel and salaries, wages and benefits. Average fuel cost per gallon (including fuel taxes) escalated 18.5% year over year to $2.24.
Moreover, JetBlue’s operating expenses per available seat mile (CASM) grew 1.9% to 11.52 cents. Excluding fuel, the metric declined 3.6% to 8.27 cents, reflecting its effective cost control efforts.
Balance Sheet
JetBlue exited the year with cash and cash equivalents of $474 million compared with $303 million at the end of 2017. Total debt at the end of the fourth quarter was $1,670 million compared with $1,199 million at the end of 2017.
Outlook
For the first quarter of 2019, the carrier expects capacity to increase between 7.5% and 9.5%. The metric is anticipated to improve in the range of 5-7% for 2019.
Consolidated operating cost per available seat mile, excluding fuel, is expected to increase 1.5-3.5% in the first quarter. For the current year, the metric is still projected to either remain flat or increase up to 2%. The metric is anticipated to grow at a faster pace in the first half of 2019, mainly due to the pilot contract inked on Aug 1, 2018.
RASM is expected to either decline 2% or increase up to 1% in the first quarter of 2019. First-quarter fuel cost, net of hedges, is anticipated to be $2.01 per gallon. The company is well on track to achieve its 2020 EPS target, which is in the $2.5-$3 range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -20.1% due to these changes.
VGM Scores
At this time, JetBlue has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, JetBlue has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
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