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Why JetBlue Stock is Up More Than 10% in the Last 90 Days?

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Shares of JetBlue Airways Corporation (JBLU - Free Report) have rallied 10.5%, outperforming the Zacks Airline industry’s gain of 8.7% over the last three months.


 

Stocks exhibiting such impressive price movements are generally considered lucrative investment options. This is because the stock price rise is generally attributed to some positive development(s) surrounding the company and is certainly not out of the blue or arbitrary. Likewise, JetBlue stock witnessed a slew of positive factors, leading to its commendable stock price appreciation.

Let’s delve deep into the factors that drove the shares up.

Catalysts Behind the Surge

The recently initiated tax law is expected to aid JetBlue by significantly reducing its tax bill. Under the new law, corporate tax rate has been lowered from 35% to 21%. Since most airline companies are almost entirely exposed to the statutory corporate tax rate, the massive tax cut is expected to help them save a considerable amount in tax payment in the United States. This will in turn leave JetBlue with more cash in hand to fund its capital expenditures, acquisitions, share repurchases among others.

Moreover, in December 2017, JetBlue provided an improved guidance for fourth-quarter RASM (revenue per available seat mile). The carrier now expects RASM in the range of down 0.5% to up 1.5% (on a year-over-year basis). The revised view reflects an increase from the prior outlook of a decline of 3% to flat year over year. The low-cost carrier now estimates hurricanes Irma and Maria to hurt its fourth-quarter results to the tune of approximately 50 basis points. This projection is also a progress over the previous forecast of one-two percentage points.

In a move to further enhance shareholders' wealth, the company’s board of directors approved a new share repurchase program last month. This initiative in turn confirms the company’s sound financial position and its favorable prospects. The new authorization permits JetBlue to buy back its common stock worth up to $750 million. The program spanning two years, commenced on Jan 1, 2018.

The company’s efforts to deleverage itself by decreasing debt levels are also impressive. Evidently, its long-term debt-to-equity (expressed as a percentage) stands at 24.9.  This compares favorably with its industry’s figure of 86.3 as well as the S&P 500 index’s measurement of 82.9.
 
Additionally, the company's attempts to modernize its fleet are encouraging.

A Broker Favorite

JetBlue’s earnings estimates highlight a healthy uptrend. The stock has witnessed the Zacks Consensus Estimate for fourth-quarter 2017 earnings being revised 10% upward in the last 30 days. Also, the earnings estimate for 2017 has been raised 1.1% over the same time frame.

Given the wealth of information at the brokers’ disposal, it is in the best interests of investors to be guided by a prudent broker advice and the direction of estimate revisions lent by an analyst’s expertise. For estimate revisions serve an important pointer to determine the stock price.

Zacks Rank & Style Score

JetBlue has a Zacks Rank #3 (Hold) and a VGM Score of B. The commendable VGM score further bolsters its attractive status. Here V stands for Value, G for Growth and M for Momentum and the VGM Score is a weighted combination of all three aspects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Some better-ranked stocks in the airline space are Deutsche Lufthansa AG (DLAKY - Free Report) , Gol Linhas Aereas Inteligentes S.A. and SkyWest, Inc. (SKYW - Free Report) . While Deutsche Lufthansa and Gol Linhas sport a Zacks Rank #1, SkyWest carries a Zacks Rank #2 (Buy).

Shares of Deutsche Lufthansa, Gol Linhas and SkyWest have soared more than 100%, 200% and 45%, respectively, in 2017.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

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