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JetBlue (JBLU) Up on Q1 Earnings Beat, Upbeat RASM View

Zacks Equity Research

JetBlue Airways JBLU reported better-than-expected earnings and revenues in the first quarter of 2019. The company’s bottom line (excluding 2 cents from non-recurring items) came in at 16 cents per share, which outpaced the Zacks Consensus Estimate of 12 cents. However, quarterly earnings declined on a year-over-year basis due to high costs.

Operating revenues totaled $1,871 million, which surpassed the Zacks Consensus Estimate of $1,865.6 million. Moreover, it compared favorably with the year-ago number. Passenger revenues, which accounted for bulk of the top line (96.3%), improved 6.5% in the quarter under review. Other revenues were up 11.8%.

Additionally, this low-cost carrier issued an encouraging projection with respect to revenue per available seat mile (RASM: a key measure of unit revenue). For the second quarter, JetBlue expects RASM to grow between 1% and 4% year over year.  Placement of Easter/Passover holiday in April is expected to positively impact the metric to the tune of 2.25 points. RASM had declined 3.1% to 12.12 cents in the reported quarter.

The company's better-than-expected earnings in the first quarter and upbeat RASM projection for the second quarter pleased investors. As a result, the stock gained value in pre-market trading.

JetBlue Airways Corporation Price, Consensus and EPS Surprise


JetBlue Airways Corporation Price, Consensus and EPS Surprise | JetBlue Airways Corporation Quote

Other Details

Capacity, measured in available seat miles, expanded 10.1% year over year. Meanwhile, traffic, measured in revenue passenger miles, grew 7.3% in the reported quarter. Consolidated load factor (percentage of seats filled by passengers) contracted 210 basis points year over year to 82.5% as traffic growth was outpaced by capacity expansion in the three-month period.

Average fare at JetBlue during the quarter increased 3.5% to $177.24. Yield per passenger mile inched down 0.7% year over year to 14.15 cents. Passenger revenue per available seat mile (PRASM) decreased 3.2% to 11.67 cents.

In the first quarter, total operating expenses (on a reported basis) rose 10.2% year over year mainly due to higher costs pertaining to salaries, wages and benefits. Average fuel cost per gallon (including fuel taxes) decreased 2% year over year to $2.05.

Moreover, JetBlue’s operating expenses per available seat mile (CASM) inched up 0.1% to 11.63 cents. Excluding fuel, the metric increased 0.9% to 8.66 cents.

JetBlue, carrying a Zacks Rank #4 (Sell), exited the quarter with cash and cash equivalents of $464 million compared with $474 million at the end of 2018. Total debt at the end of the first quarter was $1,539 million compared with $1, 670 million at the end of 2018.

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For the second quarter of 2019, the carrier expects capacity to increase between 4.5% and 6.5%. The metric is anticipated to improve in the range of 4.5-6.5% for 2019.

Consolidated operating cost per available seat mile, excluding fuel, is expected to increase 1.5-3.5% in the second quarter. For the current year, the metric is still projected to either remain flat or increase up to 2%.

Second-quarter fuel cost, net of hedges, is anticipated to be $2.21 per gallon. The company is well on track to achieve its 2020 EPS target, which is in the $2.5-$3 range. The Zacks Consensus Estimate for 2020 earnings is currently pegged at $2.27.

Total capital expenditures for the second quarter are expected between $330 million and $395 million. The metric is anticipated  in the range of $1200-$1400 million for 2019.

Upcoming Releases

Investors interested in the Zacks Airline industry are keenly awaiting first-quarter 2019 earnings reports from key players like Southwest Airlines LUV, Alaska Air Group ALK) and American Airlines AAL. While Southwest Airlines and Alaska Air are scheduled to report on Apr 25, American Airlines will do so on Apr 26.

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