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JetBlue (JBLU) Stock Up 5% on Q4 Earnings and Revenue Beat

Zacks Equity Research

JetBlue Airways Corporation JBLU performed impressively in the fourth quarter of 2018, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate.

The company’s earnings (excluding 5 cents from non-recurring items) of 50 cents per share surpassed the Zacks Consensus Estimate by 8 cents and increased 56.3% year over year. The bottom line was driven by the company’s prudent non-fuel cost management.

Total revenues came in at $1,968 million, which edged past the Zacks Consensus Estimate of $1,965.4 million and increased 12% year over year. Passenger revenues, which accounted for bulk of the top line (96.1%), improved 12.1% in the quarter under review. Other revenues were up 8.8%.

JetBlue’s outperformance pleased investors. As a result, shares of this Zacks Rank #2 (Buy) company increased 5.1% on Jan 23, closing the trading session at $18.12. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operating Statistics in Q4

Capacity, measured in available seat miles, expanded 9.3% year over year. Meanwhile, traffic, measured in revenue passenger miles, grew 8.6% in the reported quarter. However, load factor (percentage of seats filled by passengers) contracted 60 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 6.6% to $183.62. Yield per passenger mile improved 3.2% year over year to 15.1 cents. Passenger revenue per available seat mile (PRASM: a key measure of unit revenue) increased 2.5% to 12.46 cents and operating revenue per available seat mile (RASM) inched up 2.4% to 12.98 cents.

Expenses

In the fourth quarter, total operating expenses (on a reported basis) rose 11.4% year over year mainly due to higher costs pertaining to aircraft fuel and salaries, wages and benefits. Average fuel cost per gallon (including fuel taxes) escalated 18.5% year over year to $2.24.

Moreover, JetBlue’s operating expenses per available seat mile (CASM) grew 1.9% to 11.52 cents. Excluding fuel, the metric declined 3.6% to 8.27 cents, reflecting its effective cost control efforts.

JetBlue Airways Corporation Price, Consensus and EPS Surprise

 

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

Balance Sheet

JetBlue exited the year with cash and cash equivalents of $474 million compared with $303 million at the end of 2017. Total debt at the end of the fourth quarter was $1,670 million compared with $1,199 million at the end of 2017.

Outlook

For the first quarter of 2019, the carrier expects capacity to increase between 7.5% and 9.5%. The metric is anticipated to improve in the range of 5-7% for 2019.

Consolidated operating cost per available seat mile, excluding fuel, is expected to increase 1.5-3.5% in the first quarter. For the current year, the metric is still projected to either remain flat or increase up to 2%. The metric is anticipated to grow at a faster pace in the first half of 2019, mainly due to the pilot contract inked on Aug 1, 2018.

RASM is expected to either decline 2% or increase up to 1% in the first quarter of 2019. First-quarter fuel cost, net of hedges, is anticipated to be $2.01 per gallon. The company is well on track to achieve its 2020 EPS target, which is in the $2.5-$3 range.

Upcoming Releases

Investors interested in the Zacks Transportation sector are keenly awaiting fourth-quarter 2018 earnings reports from key players like ArcBest Corporation ARCB, Allegiant Travel Company ALGT and SkyWest SKYW. While ArcBest and Allegiant are scheduled to report fourth-quarter earnings on Jan 30, SkyWest will release the same on Jan 31.

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