Is An Earnings Beat In The Cards For JetBlue?

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JetBlue Airways

JetBlue Corporation (NYSE:JBLU) is all set to report earnings for the second quarter of FY 2017 early next week. The company posted a rather modest start to the year, just about beating the revenue and earnings consensus estimates. That said, this quarter could see a better comparative performance on the back of an improved unit revenue scenario, and placement of the Easter weekend. Management has hinted that unit revenues could fall within the 4-6% band this time, representing a mammoth improvement in the key metric.

While revenues continue to remain positive this quarter, earnings are expected to take a hit on rising costs. Analysts estimate earnings to come in around $0.55 per share.

Probable Highlights:

  • As mentioned above, unit revenues are expected to come in significantly higher than previously expected. The key metric is expected to come in around 4-6% higher in comparison to the same period last year. Given the return to positivity, we can expect capacity growth to also increase in a similar band.
  • The bottom line is expected to be hurt on the back of increasing ex-fuel costs. The recently ratified labor contracts will continue to weigh on earnings over the next few quarters. Cost per available seat miles (ex-fuel CASM) is anticipated to grow by a notable 4.5-6.5% in the quarter.
  • JetBlue has invested heavily towards expansion efforts in the quarter. The company has announced enhanced flight offerings between Fort Lauderdale-Hollywood International Airport and Mexico City International Airport (MEX) as well as between Orlando International Airport and MEX in May this year. Additionally, the company hopes to increase flights to four daily trips between Mexico City and the U.S. Such a move is bound to help the top line in the long term.
  • Additionally, the Mint markets continue to be RASM and margin builders. The company witnessed a marked improvement in its most established Mint markets in the second quarter as well. RASM improvements in New York during the quarter are testament to this fact.
  • Further, the company is more than committed to reducing its debt significantly over the year, giving much needed respite to investors. JetBlue expects to repay debt of approximately $195 million over the remainder of the year. This move is expected to further raise optimism regarding the stock which has performed well since the last earnings call.
  • In May, JetBlue entered into a contract with Goldman Sachs in an effort to implement an accelerated share buyback program. This is a further positive which is expected to drive the second-quarter results. We can expect to learn more about this on the earnings call next week.
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