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JetBlue (JBLU) Down 3.3% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for JetBlue Airways Corporation (JBLU - Free Report) . Shares have lost about 3.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is JBLU due for a breakout? 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 drivers.

Recent Earnings

JetBlue's first-quarter 2018 earnings per share of 27 cents surpassed the Zacks Consensus Estimate of 22 cents. The bottom line also increased 8% on a year-over-year basis backed by higher passenger revenues.

However, total operating revenues of $1,754 million fell short of the Zacks Consensus Estimate of $1,757.6 million. Nevertheless, the top line increased more than 9% from the year-ago figure. Passenger revenues, which accounted for bulk of the top line (96.5%), were up 8.7% in the quarter under review. Other revenues increased 39.9%.

Operating Statistics

Capacity, measured in available seat miles, expanded 3.3% year over year. Traffic — measured in revenue passenger miles — grew 4.1% in the reported quarter. Load factor (percentage of seats filled by passengers) also improved 70 basis points (bps) year over year to 84.6% as traffic growth outpaced capacity expansion in the three-month period.

Yield per passenger mile improved 4.4% year over year to 14.26 cents. While passenger revenue per available seat mile (PRASM: a key measure of unit revenue) increased 5.3% to 12.06 cents, operating revenue per available seat mile (RASM) was up 6.1% to 12.50 cents.

Expenses

In the first quarter, total operating expenses (on a reported basis) increased 11.5% year over year mainly owing to high fuel costs. Average fuel cost per gallon (including fuel taxes) escalated 23% to $2.09. Moreover, JetBlue’s operating cost per available seat mile (CASM) was up 8% to 11.59 cents. Excluding fuel, the metric climbed 3.1% to 8.55 cents on account of a rise in labor costs.

Balance Sheet

JetBlue exited the quarter with cash and cash equivalents of $511 million compared with $303 million at the end of 2017. Total debt, at the end of the quarter, was $1,143 million than $1,199 million at the end of 2017. We note that this low-cost carrier is constantly working toward reducing its debt levels.

Outlook

For the second quarter of 2018, the carrier expects capacity to increase between 5% and 7%. The metric is still anticipated to increase in the range of 6.5-8.5% for 2018.

Consolidated operating cost per available seat mile, excluding fuel, is expected to grow in the band of 2-4% in the second quarter. For the current year, the metric is still projected in the range of -1% to +1% (year over year).

RASM movement is expected between 0% and -3% in the second quarter on a year-over-year basis. Second-quarter fuel cost, net of hedges, is anticipated to be $2.23 per gallon.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter.

VGM Scores

At this time, JBLU has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, JBLU has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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