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JetBlue (JBLU) Up 0.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for JetBlue Airways (JBLU - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is JetBlue due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

JetBlue Posts Loss in Q2

JetBlue incurred a second-quarter 2021 loss (excluding 84 cents from non-recurring items) of 64 cents per share, comparing favorably with the Zacks Consensus Estimate of a loss of 73 cents. This was the sixth successive quarterly loss posted by this low-cost carrier. Quarterly loss per share was also narrower than the year-ago loss of $2.02.

Operating revenues of $1,499 million skyrocketed 597.7% year over year and also surpassed the Zacks Consensus Estimate of $1,441.3 million. This massive year-over-year jump reflects improving air-travel demand as more and more people take to the skies following widespread vaccination. Revenues soared 104.5% sequentially. However, compared with the second-quarter 2019 actuals, quarterly revenues declined 29%

Passenger revenues, which accounted for bulk of the top line (92.6%), increased to $1,388 million in second-quarter 2021 from a mere $170 million a year ago when the impact of coronavirus on air-travel demand was much severe. Other revenues surged in excess of 100% to $111 million.

Other Details

All comparisons are presented on a year-over-year basis. Revenue per available seat mile (RASM: a key measure of unit revenues) in the reported quarter improved 23.4% to 10.99 cents. Passenger revenue per available seat mile (PRASM) increased 44.2% to 10.18 cents owing to better air-travel demand. Average fare at JetBlue during the quarter decreased 36.9% to $174.47. Yield per passenger mile dropped 38.5% year over year to 12.82 cents.

Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) skyrocketed 1224% in the reported quarter. To cater to this increased demand, capacity (measured in available seat miles) expanded to 13,645 million from 2,413 million. Consolidated load factor (percentage of seats filled by passengers) increased 45.4 percentage points to 79.2% in the second quarter of 2021.

In the second quarter, total operating expenses (on a reported basis) increased 116.3% to $336 million, mainly due to a 1052% rise in aircraft fuel and related taxes. Average fuel price per gallon (including related taxes) climbed to $1.91 from 96 cents a year ago as oil prices move north.

JetBlue’s operating expenses per available seat mile (CASM) fell 61.7% to 9.91 cents. Excluding fuel, the metric declined 72.8% to 10.05 cents.

JetBlue exited the second quarter of 2021 with cash and cash equivalents of $2,409 million compared with $1,918 million at the end of 2020. Total debt at the end of the reported quarter was $4,430 million compared with $4,863 million at 2020 end.

The carrier exited the September quarter with $3.7 billion of unrestricted cash, cash equivalents and short-term investments.

Q3 Outlook

Revenues for the third quarter of 2021 are expected to decline in the 4-9% range from the third-quarter 2019 actuals.  Capacity is anticipated to be either flat or decline up to 3% in the September quarter from the figure reported in the third quarter of 2019. Average fuel cost per gallon in the September quarter is estimated to be $2.09.  

Adjusted EBITDA is expected in the range of $75-$175 million. Management expects to remain in the positive EBITDA territory through the end of the year and anticipates to generate pre-tax profits in July and August. CASM (ex-fuel) is expected to increase in the 11-13% band in the September quarter from the recorded third-quarter 2019 levels.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 67.61% due to these changes.

VGM Scores

At this time, JetBlue has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, JetBlue has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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