It has been about a month since the last earnings report for JetBlue Airways (JBLU - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is JetBlue due for a pullback? 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.
JetBlue Beats on Q3 Earnings
JetBlue's earnings per share (excluding 4 cents from non-recurring items) came in at 59 cents per share, which outpaced the Zacks Consensus Estimate of 53 cents. Moreover, quarterly earnings surged 37.2% on a year-over-year basis, mainly due to low fuel costs.
Operating revenues totaled $2,086 million, roughly in line with the Zacks Consensus Estimate. Moreover, it compared favorably with the year-ago number. Passenger revenues, which accounted for bulk of the top line (96.1%), improved 3.3% year over year in the quarter under review. Other revenues were also up 21.6%.
Additionally, revenue per available seat mile (RASM: a key measure of unit revenues) in the reported quarter dipped 0.9% to 12.8 cents. Passenger revenue per available seat mile (PRASM) slid 1.4% to 12.3 cents. Average fare at JetBlue during the quarter inched up 3.2% to $181.26. Yield per passenger mile slipped 0.9% year over year to 14.39 cents.
Capacity, measured in available seat miles, expanded 4.8% year over year. Meanwhile, traffic, measured in revenue passenger miles, grew 4.2% in the reported quarter. Consolidated load factor (percentage of seats filled by passengers) contracted 40 basis points year over year to 85.5% as traffic growth was outpaced by capacity expansion in the September quarter.
In the third quarter, total operating expenses (on a reported basis) declined 4.7% year over year despite higher costs pertaining to salaries, wages and benefits. Average fuel cost per gallon (including fuel taxes) decreased 11% year over year to $2.06. JetBlue’s operating expenses per available seat mile (CASM) declined 9.1% to 11.29 cents. Excluding fuel, the metric increased .3% to 8.33 cents.
JetBlue exited the quarter with cash and cash equivalents of $695 million compared with $474 million at the end of 2018. Total debt at the end of the third quarter was $1,636 million compared with $1, 670 million at 2018 end.
For the fourth quarter of 2019, JetBlue expects RASM to decline between 0.5% and 3.5% year over year. For the same time frame, the carrier anticipates capacity to increase between 4.5% and 6.5%. The metric is now projected to improve in the 6-7% range for 2019 (earlier guidance hinted at capacity expansion in the 5.5-6.5% band).
Consolidated operating cost per available seat mile excluding fuel is expected to either decline 1% or increase up to 1% in the fourth quarter. For the current year, the metric is still predicted to increase between 0.5% and 1.5%. The company reaffirms effective tax rate of around 26% for the full year.
Fourth-quarter fuel cost, net of hedges, is estimated to be $2.07 per gallon. The company is well on track to achieve its 2020 EPS target, which is in the $2.5-$3 range. Total capital expenditures for the fourth quarter are expected between $490 million and $610 million. While the metric is forecast in the range of $1,150-$1,300 million for the ongoing year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -8.44% due to these changes.
At this time, JetBlue has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, JetBlue has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.