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Here's Why Hold Strategy is Apt for JetBlue (JBLU) Right Now

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JetBlue Airways (JBLU - Free Report) is benefiting from the buoyant air travel demand scenario and fleet upgrade efforts. However, escalating fuel costs are concerning. JetBlue currently carries a Zacks Rank #3 (Hold).

Factors Favoring JBLU

Driven by upbeat air-travel demand, operating revenues at JetBlue increased 34.1% year over year to $2,328 million in first-quarter 2023, also beating the Zacks Consensus Estimate of $2,322.5 million. Passenger revenues, accounting for the bulk of the top line (93.7%), increased to $2,182 million in first-quarter 2023 from $1,603 million a year ago when air travel demand was not so robust.

With air travel demand expected to remain strong in the June quarter, management anticipates total revenues to increase 4.5-8.5% on a year-over-year basis. Total revenues for 2023 are forecast to increase year over year in the high-single to low-double-digit range.

We are also impressed by the company's efforts to modernize its fleet. In February 2022, JetBlue inked a firm order with Airbus, permitting it to add 30 more Airbus A220-300 aircraft to its order book. Debt reduction efforts at JBLU are commendable as well.

A Key Risk

Escalating fuel costs pose a threat to JetBlue’s bottom line. The oil price is moving north primarily because of supply concerns due to the ongoing Russia-Ukraine war. In first-quarter 2023, the average fuel price per gallon (including related taxes) climbed to $3.50 from $2.90 a year ago. The average fuel cost per gallon in the June quarter is estimated to be between $2.75 and $2.90.

Key Picks

Some better-ranked stocks for investors interested in the Zacks Airline industry are Alaska Air Group (ALK - Free Report) and Allegiant Travel Company (ALGT - Free Report) , each carrying a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

On the back of upbeat air travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March quarter. The company expects to boost its fleet and workforce in 2023 to meet the anticipated high demand.

ALK expects second-quarter 2023 total revenues to increase 2.5-5.5% from the second-quarter 2022 actuals. The Zacks Consensus Estimate for Alaska Air's current-year earnings has been revised upward by 9.95% in the past 60 days.

Allegiant is seeing a steady recovery in domestic and leisure air travel demand. Allegiant's operating revenues in first-quarter 2023 grew 29.9% on a year-over-year basis. Passenger revenues, which accounted for 93.7% of the top line, increased 31.3% on a year-over-year basis.

Allegiant's fleet modernization efforts are encouraging. The Zacks Consensus Estimate for ALGT's current-year earnings has been revised upward by 40.16% in the past 60 days.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

JetBlue Airways Corporation (JBLU) - free report >>

Alaska Air Group, Inc. (ALK) - free report >>

Allegiant Travel Company (ALGT) - free report >>

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