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Is JetBlue Airways (JBLU) Poised to Beat Earnings in Q2?

Zacks Equity Research

We expect JetBlue Airways Corporation (JBLU) to beat expectations when it reports its second-quarter 2014 results before the market opens on Jul 24, 2014.

Why a Likely Positive Surprise?

Our proven model shows that JetBlue is likely to beat earnings this quarter because it has the right combination of two key ingredients.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +5.26. This is because the Most Accurate estimate is poised at 20 cents whereas the Zacks Consensus Estimate is pegged at 19 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: JetBlue currently has a Zacks Rank #2 (Buy). Note that the stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. However, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of JetBlue’s Zacks Rank #2 and +5.26% ESP makes us confident of a positive earnings beat.

What is Driving the Better-Than-Expected Earnings?

JetBlue’s strong branding and product differentiation allows it to offer its customers a unique flying experience. Meanwhile, management continues to focus on achieving long-term sustainable growth, as JetBlue is the only non-unionized airline in the industry with the flexibility to manage its cost structure.

JetBlue is making continued progress in expanding its product and service offerings on board and on the ground to boost ancillary revenues and enhance ticket pricing flexibility. With a low cost structure, the company continues to expand its network footprint in major growth regions like Boston, Fort Lauderdale, the Caribbean and Latin America.

Going forward, JetBlue expects to add new routes from Boston and aims to operate 150 flights per day from the area. Short haul routes from Boston continue to reap significant benefits on efforts to reduce seasonality of network and improved corporate travel demand. The Latin America and Caribbean markets account for almost one-third of the company’s total network and serves 24 locations in the region.

JetBlue has recently won 40 new take-off and landing slots at Reagan Washington National Airport (DCA) including the 16 that it leased from American Airlines. Further, the company has taken several steps to maximize the cost efficiency of its fleet that will lower maintenance expenses to a certain extent. The company is either disposing its old aircraft or replacing the old spare engines with new ones.

Other Stocks to Consider

Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter are as follows:

Southwest Airlines Co. (LUV) has an earnings ESP of +3.39% and a Zacks Rank #1 (Strong Buy).

American Airlines Group Inc. (AAL) has an earnings ESP of +1.56% and a Zacks Rank #1.

Alaska Air Group, Inc. (ALK) has an earnings ESP of +0.92% and a Zacks Rank #1.

Read the Full Research Report on JBLU
Read the Full Research Report on AAL
Read the Full Research Report on LUV
Read the Full Research Report on ALK

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