JetBlue Airways Corporation Will Soar to a Higher Altitude
JetBlue Airways Corporation (NASDAQ:JBLU) appears to have returned to a recovery mode. JBLU stock fell by 25% following the service disruptions during the hurricane season. However, for November, the stock price has risen by about 10%. Given the stock price recovery and continued revenue growth, it’s likely the turbulence in JBLU’s stock price will prove to be temporary.
JetBlue has been one of the few airlines to remain consistently profitable. Its track record has not been as long as its most similar competitor, Southwest Airlines Co (NYSE:LUV). Still, the airline usually earns profits in an industry famous for losing money.
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JBLU Stock Has Succeeded by Following Southwest
The carrier was founded in 1999 by David Neeleman. JBLU modeled itself in some respects after Southwest. The company followed the Southwest model of using very few aircraft types. However, JetBlue employs three types of aircraft compared to Southwest’s one type. Their larger aircraft are all Airbus A320 and A321 airplanes. JetBlue also flies the Embraer 190 (E190), a smaller aircraft better-suited for serving smaller markets.
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Unlike Southwest, JetBlue sought to add in-flight entertainment, TVs for every seat, and Sirius XM Satellite radio. The airline enjoyed early successes. Like all airlines, JBLU took a hit from the September 11, 2001, terrorist attacks. However, unlike most airlines, JBLU stock still reported a profit during this time.
JBLU Stock Has Been Improving
The company held its IPO on JBLU stock in 2002. It went on to add service to cities across the U.S., Latin America, and the Caribbean. The company did not report quarterly losses until 2005. However, during this time, problems with passenger complaints and earnings led to the departure of Neeleman in 2007. Barred from working for another U.S. carrier by his JetBlue contract, Neeleman returned to his native Brazil where he launched a low-cost airline called Azul SA (ADR) (NYSE:AZUL).
The company experienced a few leadership changes during this time. However, Joel Peterson took over as chairman in 2008, and the airline returned to profitability soon after. Wall Street largely ignored the increasing profits of JBLU stock at first. However, investors eventually noticed, and the JBLU stock price quadrupled between 2013 and 2015. Unfortunately for current stockholders, it has stagnated since that time and trades in the low $20s per share. Still, profits have grown twelvefold since 2009.
JBLUE Stock Weathers Hurricanes
This year, analysts expect earnings per share (EPS) to fall to about $1.75 per share, down from $2.22 per share in 2016. The company blamed the lower earnings on service disruptions caused by a busy hurricane season. Forecasts paint a mixed picture beyond 2017. Some expect annual EPS to remain below $2 per share through at least 2019. Other analysts expect increases to resume.
Despite lower profits, revenues increases weren’t disrupted. Revenue has increased by an average of 8% per year over the last five years. That level of revenue growth is expected to continue. In fact, JetBlue’s revenue growth has outperformed legacy carriers American Airlines Group Inc (NASDAQ:AAL), Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL), and most notably Southwest Airlines. Investors should also note that the PE ratio stands at just under 11. This places JBLU stock near the average for the industry, and well below Southwest’s PE ratio of almost 17.
Expect JBLU Stock To Resume Growth
With the steady increase in employees, destinations, and miles flown, revenue increases and EPS growth should continue. JetBlue also has ample room to grow. The airline has yet to enter the Canadian market. Also, many cities within the United States, Mexico, and Central America remain unserved by JetBlue. The airline can also continue its expansion into South America for years to come, even if it chooses not to directly compete with its founder’s current carrier, Azul Brazilian Airlines.
JBLU stock experienced a bumpy ride this year. However, the stock looks poised to enjoy clear skies for the foreseeable future. Modeled after Southwest, the airline has enjoyed Southwest-like success for most of its history. Since 2009, JBLU has enjoyed steady increases in revenue and profits. Though the hurricane season hurt earnings in the short term, the stock is back on track to resume its growth pattern. Now that JetBlue weathered the turbulence caused by the hurricane season, the airline should again start flying higher for years to come.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.
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