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Analyst Blog

On Aug 23, we maintained our Neutral recommendation on JetBlue Airways Corporation (JBLU - Analyst Report). The company is favorably positioned for growth thanks to its distinctive business model, superior in-flight services, foray into new locations, strong liquidity positions and a non-unionized workforce. However, the company’s near-term performance might be impacted by certain headwinds.

Why Maintained?

We believe that with its product differentiation, JetBlue offers customers a unique flying experience. In the coming months, the company will benefit from growing travel demand, schedule redesigning, cost control measures, optimization of unit revenues, capital expenditure management, strong branding and disciplined growth.

JetBlue is making continued progress in expanding its product and service offerings on board and on the ground to aid growth in ancillary revenues along with enhanced ticket pricing flexibility. Being a low cost carrier, the company also continues to successfully expand its network footprint in two major growth regions – Boston, and Caribbean and Latin America.

Additionally, JetBlue remains focused on growing partnerships (codeshare, interline and baggage handling agreements) with both legacy and international carriers to enhance its services and take advantage of travel benefits. The airline has also taken several steps to maximize the cost efficiency of its fleet in order to lower maintenance expense to a certain extent.

However, rising fuel price, competitive pressures, and an uncertain economic situation remain an overhang on the stock. Further, JetBlue’s no-dividend payment strategy is not likely to be appreciated by the investors.

For the third quarter and full year 2013, the respective Zacks Consensus Estimates for earnings are 19 cents and 43 cents per share. This reflects year-over-year growth of 33.9% and 8.4%, respectively.

Other Stocks

Companies operating within the sector and worth taking note of include US Airways Group Inc. with a Zacks Rank #1 (Strong Buy) as well as GOL Linhas A (GOL - Analyst Report) and Republic Airways Holdings Inc. (RJET - Snapshot Report) with Zacks Rank #2 (Buy).
 

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