On Oct 4, 2016, we issued an updated research report on JetBlue Airways Corporation (JBLU - Analyst Report) . The Long Island City, NY-based low-cost carrier currently carries a Zacks Rank #2 (Buy), indicating that it will outperform the broader market in the near term.
We are impressed by the renewable jet fuel purchase agreement between JetBlue Airways and SG Preston last month. Under this deal, which is aimed at reducing carbon emissions, JetBlue is expected to purchase over 33 million gallons of blended fuel per year from SG Preston over a period of 10 years. This deal is by far the largest, binding commitment for hydro-processed esters and fatty acids (HEFA)-based renewable fuel purchase over a long term by an airline company.
We are also impressed by the company’s bullish guidance for total revenue per available seat mile (RASM: a key measure of unit revenue) for the third quarter. The carrier expects RASM for the third quarter to decline 3–4% year over year. This marks an improvement from the 8.2% decline in the second quarter.
We are also positive on the U.S. DOT’s decision to grant final approval to eight carriers, including JetBlue, to initiate commercial flights to Havana. The approval was gained on the same day the first U.S. flight landed in Cuba in more than 50 years. The flight from Fort Lauderdale to Santa Clara was operated by JetBlue.
Moreover, the carrier has an impressive history with respect to earnings per share. JetBlue Airways managed to outperform the Zacks Consensus Estimate in each of the last four quarters with an average earnings beat of 7.76%. We expect the carrier to perform well in the third quarter as well. In fact, the Zacks Consensus Estimate for the quarter has increased by 7 cents to 59 cents per share over the last three months.
In view of the above positives, we believe that JetBlue Airways has significant scope for share price appreciation the near term and hence, advice investors to add the stock to their portfolio.
Other Stocks to Consider
Apart from JetBlue Airways, investors interested in the airlines industry may consider stocks like Ryanair Holdings (RYAAY - Snapshot Report) , GOL Linhas (GOL - Analyst Report) and Copa Holdings (CPA - Snapshot Report) . While Ryanair and GOL Linhas carry a Zacks Rank #2 (Buy), Copa Holdings sports a Zacks Rank#1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The 2016 Zacks Consensus Estimate for Copa Holdings has climbed 10 cents to $4.55 per share in the last month.
The Zacks Consensus Estimate for fiscal 2017 has climbed 4 cents to $5.99 per share for Ryanair in the last month.
The loss estimate for GOL Linhas has narrowed to 11 cents for the third quarter from a loss of $1.60 expected a month ago.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>