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Why is JetBlue (JBLU) Stock Down Despite Q2 Earnings Beat?
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JetBlue Airways’ (JBLU - Free Report) second-quarter 2023 earnings (excluding 4 cents from non-recurring items) of 45 cents per share beat the Zacks Consensus Estimate of 40 cents. Results were aided by strong air-travel demand. In the year-ago quarter, JBLU incurred a loss of 47 cents per share.
Despite the earnings beat, shares of JBLU tumbled 8.3% on Aug 1, closing the trading session at $7.12 per share. The downside was due to the bearish guidance issued by management for third quarter as well as full-year 2023.
In third-quarter 2023, JBLU expects either breakeven earnings or loss up to 20 cents per share. The Zacks Consensus Estimate is currently pegged at 41 cents.
For the current year, the earnings forecast is also gloomy. Management now projects 2023 earnings in the range of 5-40 cents per share (earlier guidance: $0.7-$1). The Zacks Consensus Estimate is currently pegged at 74 cents. The bearish views are primarily due to management’s decision to end its alliance with American Airlines (AAL - Free Report) following an adverse court ruling.
Coming back to the second-quarter earnings report, operating revenues of $2,610 million marginally missed the Zacks Consensus Estimate of $2,610.9 million. However, the top line increased 6.75% year over year on account of improving air-travel demand.
Passenger revenues, accounting for the bulk of the top line (94.25%), climbed to $2,460 million from $2,302 million a year ago when air-travel demand was not so robust. The metric fell short of our projection of $2,527.9 million. Other revenues rose 4.8% to $150 million.
JetBlue Airways Corporation Price, Consensus and EPS Surprise
All comparisons are presented on a year-over-year basis.
Revenue per available seat mile (RASM: a key measure of unit revenues) improved 9% to 15.04 cents. Passenger revenue per available seat mile inched up 1% to 14.17 cents owing to better air-travel demand.
Average fare at JetBlue inched down 0.9% to $219.47. Yield per passenger mile inched up 0.8% to 16.62 cents, which fell short of our estimate of 17.56 cents.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) improved 5.9%. To cater to this increased demand, capacity (measured in available seat miles) rose 5.8% to 17,353 million. Consolidated load factor (percentage of seats filled by passengers) expanded 20 basis points to 85.3% as traffic growth outpaced capacity expansion. The actual value outperformed our projection of 83.6%.
Total operating expenses (on a reported basis) decreased 7.2% to $2,375 million, mainly due to 34.2% reduction in aircraft fuel expenses and related taxes. Average fuel price per gallon (including related taxes) declined to $2.63 from $4.24 a year ago, as oil prices move south. We expected the metric to be $2.76 per gallon.
JBLU’s operating expenses per available seat mile (CASM) fell 12.2% year over year. Excluding fuel, CASM increased 3.2% to 10 cents.
JetBlue, currently carrying a Zacks Rank #2 (Buy), exited the quarter with cash and cash equivalents of $1,462 million compared with $1,042 million at the end of 2022. Total debt at the end of the June quarter was $3,757 million compared with $3,647 million at 2022 end. During the quarter, JBLU paid off $200 million of debt and finance lease obligations.
While providing guidance for third-quarter 2023, management stated that all comparisons are made with respect to third-quarter 2022 figures.
Capacity is anticipated to increase in the 5.5-8.5% band. CASM, excluding fuel and special items, is predicted to rise 2.5-5.5%. Capital expenditures are likely to be roughly $400 million in the third quarter.
Total revenues are forecast to decrease in the range of 4-8%. Average fuel cost per gallon in the September quarter is estimated to be between $2.75 and $2.90. Interest expense is forecast in the $45-$55 million band.
For full-year 2023, capacity is expected to grow in the band of 5.5-8.5% from the 2022 actuals. CASM, excluding fuel and special items, is predicted to rise 1.5-4.5% from the 2022 actuals. Current-year interest expense is forecast in the $195-$205 million band. Total revenues for 2023 are anticipated to register year-over-year increase of 6-9%. Capital expenditures are likely to be roughly $1.3 billion in the current year.
A Sneak Peek Into Other Notable Airlines’ Results
American Airlines’ second-quarter 2023 earnings (excluding 4 cents from non-recurring items) of $1.92 per share easily beat the Zacks Consensus Estimate of $1.58. AAL’s results were aided by lower costs and higher revenues.
Operating revenues of $14,055 million rose 4.7% year over year. The top line beat the Zacks Consensus Estimate of $13,736.3 million.
Passenger revenues, accounting for 92.3% of the top line, increased to $12,978 million from $12,223 million a year ago. This was driven by strong air-travel demand, mainly on the domestic front. Demand was particularly strong in June on the back of growth in close-in bookings.
United Airlines (UAL - Free Report) reported second-quarter 2023 earnings per share of $5.03, which outpaced the Zacks Consensus Estimate of $3.99 and improved more than 100% year over year.
Operating revenues of $14,178 million beat the Zacks Consensus Estimate of $13,927.1 million. UAL’s revenues increased 17.1% year over year due to upbeat air-travel demand. The uptick was driven by a 20.1% rise in passenger revenues (accounting for 91.7% of the top line) to $13,002 million. Nearly 42 million passengers traveled on UAL flights in the second quarter.
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Why is JetBlue (JBLU) Stock Down Despite Q2 Earnings Beat?
JetBlue Airways’ (JBLU - Free Report) second-quarter 2023 earnings (excluding 4 cents from non-recurring items) of 45 cents per share beat the Zacks Consensus Estimate of 40 cents. Results were aided by strong air-travel demand. In the year-ago quarter, JBLU incurred a loss of 47 cents per share.
Despite the earnings beat, shares of JBLU tumbled 8.3% on Aug 1, closing the trading session at $7.12 per share. The downside was due to the bearish guidance issued by management for third quarter as well as full-year 2023.
In third-quarter 2023, JBLU expects either breakeven earnings or loss up to 20 cents per share. The Zacks Consensus Estimate is currently pegged at 41 cents.
For the current year, the earnings forecast is also gloomy. Management now projects 2023 earnings in the range of 5-40 cents per share (earlier guidance: $0.7-$1). The Zacks Consensus Estimate is currently pegged at 74 cents. The bearish views are primarily due to management’s decision to end its alliance with American Airlines (AAL - Free Report) following an adverse court ruling.
Coming back to the second-quarter earnings report, operating revenues of $2,610 million marginally missed the Zacks Consensus Estimate of $2,610.9 million. However, the top line increased 6.75% year over year on account of improving air-travel demand.
Passenger revenues, accounting for the bulk of the top line (94.25%), climbed to $2,460 million from $2,302 million a year ago when air-travel demand was not so robust. The metric fell short of our projection of $2,527.9 million. Other revenues rose 4.8% to $150 million.
JetBlue Airways Corporation Price, Consensus and EPS Surprise
JetBlue Airways Corporation price-consensus-eps-surprise-chart | JetBlue Airways Corporation Quote
Other Details
All comparisons are presented on a year-over-year basis.
Revenue per available seat mile (RASM: a key measure of unit revenues) improved 9% to 15.04 cents. Passenger revenue per available seat mile inched up 1% to 14.17 cents owing to better air-travel demand.
Average fare at JetBlue inched down 0.9% to $219.47. Yield per passenger mile inched up 0.8% to 16.62 cents, which fell short of our estimate of 17.56 cents.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) improved 5.9%. To cater to this increased demand, capacity (measured in available seat miles) rose 5.8% to 17,353 million. Consolidated load factor (percentage of seats filled by passengers) expanded 20 basis points to 85.3% as traffic growth outpaced capacity expansion. The actual value outperformed our projection of 83.6%.
Total operating expenses (on a reported basis) decreased 7.2% to $2,375 million, mainly due to 34.2% reduction in aircraft fuel expenses and related taxes. Average fuel price per gallon (including related taxes) declined to $2.63 from $4.24 a year ago, as oil prices move south. We expected the metric to be $2.76 per gallon.
JBLU’s operating expenses per available seat mile (CASM) fell 12.2% year over year. Excluding fuel, CASM increased 3.2% to 10 cents.
JetBlue, currently carrying a Zacks Rank #2 (Buy), exited the quarter with cash and cash equivalents of $1,462 million compared with $1,042 million at the end of 2022. Total debt at the end of the June quarter was $3,757 million compared with $3,647 million at 2022 end. During the quarter, JBLU paid off $200 million of debt and finance lease obligations.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Remaining Aspects of Outlook
While providing guidance for third-quarter 2023, management stated that all comparisons are made with respect to third-quarter 2022 figures.
Capacity is anticipated to increase in the 5.5-8.5% band. CASM, excluding fuel and special items, is predicted to rise 2.5-5.5%. Capital expenditures are likely to be roughly $400 million in the third quarter.
Total revenues are forecast to decrease in the range of 4-8%. Average fuel cost per gallon in the September quarter is estimated to be between $2.75 and $2.90. Interest expense is forecast in the $45-$55 million band.
For full-year 2023, capacity is expected to grow in the band of 5.5-8.5% from the 2022 actuals. CASM, excluding fuel and special items, is predicted to rise 1.5-4.5% from the 2022 actuals. Current-year interest expense is forecast in the $195-$205 million band. Total revenues for 2023 are anticipated to register year-over-year increase of 6-9%. Capital expenditures are likely to be roughly $1.3 billion in the current year.
A Sneak Peek Into Other Notable Airlines’ Results
American Airlines’ second-quarter 2023 earnings (excluding 4 cents from non-recurring items) of $1.92 per share easily beat the Zacks Consensus Estimate of $1.58. AAL’s results were aided by lower costs and higher revenues.
Operating revenues of $14,055 million rose 4.7% year over year. The top line beat the Zacks Consensus Estimate of $13,736.3 million.
Passenger revenues, accounting for 92.3% of the top line, increased to $12,978 million from $12,223 million a year ago. This was driven by strong air-travel demand, mainly on the domestic front. Demand was particularly strong in June on the back of growth in close-in bookings.
United Airlines (UAL - Free Report) reported second-quarter 2023 earnings per share of $5.03, which outpaced the Zacks Consensus Estimate of $3.99 and improved more than 100% year over year.
Operating revenues of $14,178 million beat the Zacks Consensus Estimate of $13,927.1 million. UAL’s revenues increased 17.1% year over year due to upbeat air-travel demand. The uptick was driven by a 20.1% rise in passenger revenues (accounting for 91.7% of the top line) to $13,002 million. Nearly 42 million passengers traveled on UAL flights in the second quarter.