JetBlue: Zacks’ Bull of the Day Play

Sharp decline in oil prices will likely have a significant positive impact on the airlines’ earnings this year. Further, they also stand to benefit from improving economy and rising consumer confidence, which will result in greater demand for air travel.

Based in Long Island City, NY, JetBlue Airways Corporation (JBLUAnalyst Report) is a low cost passenger airline that
operates primarily on point-to-point routes. It operates an average of 825 daily flights and carries more than 30 million customers a year to 86 cities in the U.S., Caribbean, and Latin America.

At the end of the recent quarter, they had 199 aircraft — 130 A320s, 60 E190s, and nine A321s. The airline is well known for their high-quality customer service and excellent flying experience. Rising estimates sent the stock to Zacks Rank # 1 (Strong Buy) earlier this month.

Solid Third Quarter Results and Rising Estimates

The company reported its Q3 2014 results on October 23.. Net income for the quarter was $79 million or $0.24 per diluted share. Earnings were slightly short of the Zacks Consensus Estimate of $0.26 per share.

Total revenues increased 5.9% year-over-year with improvements in yield and load factor while the capacity grew at 4.5%. Total ancillary revenue increased by approximately 12% year-over-year. They ended the quarter with approximately $742 million in cash and short term investments.

The airline expects to benefit from the decline in fuel prices, which remains their largest expense. However, they continue to maintain a fuel hedge portfolio due to high volatility in oil prices.

Analysts have raised their estimates for JetBlue in the past few weeks, particularly after several strategic initiatives announced by them at their Investor Day in November. Zacks Consensus Estimates for the current and next year are now $0.68 per share and $1.29 per share, up from $0.66 per share and $1.01 per share, 60 days ago.

Zacks Industry Rank for “Airlines” is currently 6 out of 265 (top 2%) reflecting brightening fundamentals for the industry.

The Bottom Line

With its differentiated culture, competitive costs and high value geography, the airline looks well positioned to continue to grow and reward its shareholders.

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