Why Is JetBlue (JBLU) Down 2.2% Since Last Earnings Report?

A month has gone by since the last earnings report for JetBlue Airways (JBLU). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is JetBlue 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.

JetBlue Beats on Q4 Earnings

JetBlue's earnings per share came in at 56 cents surpassing the Zacks Consensus Estimate by a penny. Moreover, quarterly earnings increased 12% on a year-over-year basis, mainly due to low fuel costs. Operating revenues totaled $2,031 million, narrowly beating the Zacks Consensus Estimate. Moreover, it increased 3.2% from the year-ago number. Passenger revenues, which accounted for bulk of the top line (95.9%), improved 3% year over year in the quarter under review. Other revenues were also up 6.3%.

However, revenue per available seat mile (RASM: a key measure of unit revenues) in the reported quarter dipped 2.7% to 12.63 cents. Passenger revenue per available seat mile (PRASM) slid 2.8% to 12.12 cents. Average fare at JetBlue during the quarter inched up 1.3% to $185.96. Yield per passenger mile slipped 2.1% year over year to 14.79 cents.

Capacity, measured in available seat miles, expanded 6% year over year. Meanwhile, traffic, measured in revenue passenger miles, grew 5.2% in the final quarter of 2019. Consolidated load factor (percentage of seats filled by passengers) contracted 60 basis points year over year to 81.9% as traffic growth was outpaced by capacity expansion in the reported quarter.

In the fourth quarter, total operating expenses (on a reported basis) increased 3% year over year partly due to higher costs pertaining to salaries, wages and benefits. Average fuel cost per gallon (including fuel taxes) decreased 7.6% year over year to $2.07. JetBlue’s operating expenses per available seat mile (CASM) declined 2.9% to 11.22 cents. Excluding fuel, the metric was flat at 8.31 cents.

JetBlue exited 2019 with cash and cash equivalents of $929 million compared with $474 million at the end of 2018. Total debt at the end of 2019 was $2,334 million compared with $1, 670 million at 2018 end.

Outlook

For the first quarter of 2020, JetBlue expects RASM to either remain flat or increase up to 3% from the year-ago reported figure. For the same time frame, the carrier anticipates capacity to increase between 1.5% and 3.5%. The metric is projected to improve in the 5.5-7.5% range for 2020.

Consolidated operating cost per available seat mile excluding fuel is expected to increase between 1.5% and 3.5%in the first quarter. For 2020, the metric is expected to either remain flat or decrease up to 2%. The company expects effective tax rate of around 26% for the full year.

First-quarter fuel cost, net of hedges, is estimated to be $2.09 per gallon. The company expects first-quarter 2020 earnings between 10 cents and 20 cents. JetBlue expects 2020 earnings per share between $2.5 and $3. Total capital expenditures for the first quarter are expected between $325 million and $425 million. The metric is forecast in the range of $1.35-$1.55 billion for the ongoing year.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months. The consensus estimate has shifted -26.81% due to these changes.

VGM Scores

Currently, JetBlue has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, 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.

Outlook

JetBlue has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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