JetBlue’s CEO Robin Hayes has cleared his stock for landing into your portfolio in 2020.
And so has many folks on Wall Street.
“I think we will have one of the strongest earnings growth stories of anyone in the [airline] industry from 2019 to 2020,” Hayes remarked on Yahoo Finance’s The First Trade. Hayes said he is “confident” in JetBlue (JBLU) hitting its $2.50 to $3.00 a share profit outlook originally shared at an investor day in September 2018.
Somewhat oddly, JetBlue’s stock continues to trade as if the company isn’t one of the best run airlines around (it generally is seen that way) and it won’t see major earnings growth acceleration in 2020 (even though it very likely will). At a forward price-to-earnings multiple of 7.8 times, according to Yahoo Finance data, JetBlue’s stock trades at a noticeable discount relative to airline rivals Delta (DAL) (8.9 times) and SouthWest (LUV) (10.3 times).
JetBlue’s stock — trading at about $18 at last check — is hovering around the company’s $16.50 a share book value, per Yahoo Finance data. Meanwhile, the Street is only modeling JetBlue’s earnings of $2.39 a share in 2020, well below the outlook Hayes reiterated once again on Yahoo Finance’s airwaves.
Hayes acknowledges the Street is concerned about the revenue environment for JetBlue and the industry at large in 2020, amid fears of excess capacity. But what the market may be forgetting are the below the revenue line items poised to juice JetBlue’s earnings in 2020.
For one, JetBlue is nearing the end of hitting its target of lowering expenses by close to $300 million. In October, the company unveiled a new $800 million stock buyback plan. And it’s in the midst of a major fleet overhaul which will likely boost productivity.
The best of all? JetBlue only flies Airbus planes, removing the headline risk in 2020 from Boeing’s ongoing 737 Max debacle.
“We continue to believe that JetBlue’s structural cost program and changes to its fleet will drive 2020 unit costs ex-fuel down year-over-year and that the company has several revenue initiatives that should drive outperformance vs. the industry,” says Goldman Sachs analyst Catherine O’Brien. “As such, we are forecasting that it will generate the highest level of margin expansion across our airlines coverage universe.”