Despite high operating expenses, JetBlue Airways Corporation (JBLU - Free Report) has its share of positives. The carrier has been benefiting from strong passenger traffic. Notably, passenger revenues, accounting for bulk of the top line, increased 8.2% in the first nine months of 2018. Demand for air travel is anticipated to remain strong on the back of tight labor market conditions and a rising disposable income. Clearly, this tailwind is here to stay. For the fourth quarter of 2018, the carrier forecasts total unit revenues (RASM) to rise between 1.5% and 3.5%.
The carrier’s efforts to modernize its fleet are also impressive. To this end, in July 2018, it placed an order for 60 Airbus A220-300 planes (previously known as Bombardier CS300). The new, more efficient planes are scheduled to be delivered in the 2020-2025 timeframe. JetBlue has the option to buy 60 more Airbus planes 2025 onward.
Further, the carrier’s encouraging shareholder-friendly measures underscore its sound financial position. Last December, the company’s board of directors approved a new share repurchase program. The new authorization permits JetBlue to buy back its common stock worth up to $750 million. The company has completed buybacks worth $375 million as of Sep 30 through the two-year program, which commenced on Jan 1, 2018.
Owing to these tailwinds, the Zacks Consensus Estimate for JetBlue’s fourth-quarter earnings has moved 15.2% north in the last 60 days. Also, the same for 2018 earnings has been revised 2.1% upward. To top it all, the company has a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners.
In light of these positives, we believe, investors should hold onto the JetBlue stock for now.
Zacks Rank & Key Picks
JetBlue carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Air France-KLM (AFLYY - Free Report) , International Consolidated Airlines Group and Spirit Airlines (SAVE - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Air France-KLM and Spirit have rallied more than 25% and 53%, respectively, in the past six months. Meanwhile, the International Consolidated Airlines stock boasts an impressive earnings history, having trumped the Zacks Consensus Estimate in three of the trailing four quarters with an average beat of 92.9%.
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