Today is shaping up negative for JetBlue Airways Corporation (NASDAQ:JBLU) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from JetBlue Airways' 13 analysts is for revenues of US$3.2b in 2020, which would reflect a disturbing 47% decline in sales compared to the last year of performance. Losses are supposed to balloon 547% to US$5.49 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$3.7b and losses of US$4.39 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
There was no major change to the consensus price target of US$12.00, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic JetBlue Airways analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$8.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 47%, a significant reduction from annual growth of 4.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 23% annually for the foreseeable future. It's pretty clear that JetBlue Airways' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that JetBlue Airways' revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on JetBlue Airways after the downgrade.
Unfortunately, the earnings downgrade - if accurate - may also place pressure on JetBlue Airways' mountain of debt, which could lead to some belt tightening for shareholders. See why we're concerned about JetBlue Airways' balance sheet by visiting our risks dashboard for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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