On Mar 1, 2013, we maintained our Neutral recommendation on JetBlue Airways (JBLU - Analyst Report), owing to its favorable business model, superior in-flight services, fuel hedging strategy, strong liquidity position and a non-unionized workforce, partially offset by certain risk factors. The passenger airline holds a Zacks Rank #3 (Hold).
Why Kept at Neutral?
We believe that JetBlue, via its strong branding and product differentiation, 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 and disciplined growth.
JetBlue – that operates with a fleet of 127 Airbus A320 aircraft and 53 EMBRAER 190 aircraft – is concentrating on expanding its network footprint in two major growth regions – Boston, and Caribbean and Latin America. In the coming months, the company aims to start services in Albuquerque, New Mexico; Philadelphia; Pennsylvania and Medellin, Colombia. We believe that adding new routes enhances JetBlue’s growth and strengthens its network against other group members.
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. We also appreciate the carrier’s initiatives to maximize the cost efficiency of its fleet, leading to less maintenance expenses.
However, the company failed to impress us with its fourth quarter results, missing both top and bottom-line projections. Further, an unstable economic environment, fuel price volatility, competitive pressures and regulatory issues remain an overhang on the stock.
For the first and second quarters of 2013, the Zacks Consensus Estimates for earnings are 9 cents and 20 cents per share, respectively. This reflects a respective year-over-year growth of 4.04% and 26.25%.
Other stocks operating within the airline sector that are worth considering are Ryanair Holdings Plc (RYAAY - Snapshot Report), SkyWest Inc. (SKYW - Snapshot Report) and Republic Airways Holdings Inc. (RJET - Snapshot Report). All the 3 firms currently hold a Zacks Rank #1 (Strong Buy).