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Why Is JetBlue Airways (JBLU) Down 12.9% Since the Last Earnings Report?

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About a month has gone by since the last earnings report for JetBlue Airways Corporation (JBLU - Free Report) . Shares have lost about 12.9% in that time frame, underperforming the market.

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

Second Quarter Earnings

JetBlue Airways Corporation’s second-quarter 2017 earnings (excluding special items) of $0.64 per share beat the Zacks Consensus Estimate by $0.08. Operating revenues came in at $1,842 million, ahead of the Zacks Consensus Estimate of $1,822.1 million. Revenues improved 12.11% from the year-ago figure. Passenger revenues, which accounted for bulk of the top line (89.6%), improved 11% in the second quarter. Other revenues increased 22.8%.

Operating Statistics

Capacity, measured in available seat miles, expanded 4.8% year over year. Traffic, measured in revenue passenger miles, grew 5% in the second quarter. Load factor (percentage of seats filled by passengers) improved 20 basis points (bps) year over year to 85.2% in the reported quarter as traffic growth outpaced capacity expansion.

Yield per passenger mile improved 5.7% year over year to 13.6 cents in the reported quarter. Passenger revenue per available seat mile (PRASM:  a key measure of unit revenue) increased 5.9%, while operating revenue per available seat mile (RASM) climbed 7%.

Operating Income and Expenses

In the second quarter, total operating expenses (on a reported basis) increased 11.9% year over year. Average fuel cost per gallon (including fuel taxes) escalated 12.3% to $1.61. Moreover, JetBlue’s operating cost per available seat mile (CASM) increased 6.8% to 10.45 cents in the reported quarter. Excluding fuel, the metric also climbed 5.1% to 8.16 cents on the back of rise in labor costs.

Balance Sheet

JetBlue exited the quarter with cash and cash equivalents of $550 million compared with $433 million at the end of 2016. Total debt, at the end of the quarter was $1,305 million than $1,384 million at the end of 2016. In fact, the company is constantly working toward reducing its debt levels.

Outlook

For the third quarter of 2017, the carrier expects capacity to increase in the band of 6.5% to 7.5%. For the full-year 2017 the metric is projected to increase in the range of 5.5% to 6.5%.

CASM, excluding fuel, is expected to grow in the band of 1.5% to 3.5% for the third quarter. For the full-year 2017 the metric is now anticipated to grow in the range of 2% to 3.5% (old guidance had called for growth in the range of 1.5% to 3.5%). Furthermore, RASM growth is projected to range between (0.5)% and 2.5% for the third quarter of 2017 compared to the same period in the previous year. Fuel cost, net of hedges, is projected at $1.61 per gallon for the third quarter.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

VGM Scores

At this time, JetBlue Airways' stock has a nice Growth Score of B, a grade with the same score on the momentum front.  The stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Based on our scores, the stock is more suitable for value investors than momentum and growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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