A month has gone by since the last earnings report for JetBlue Airways (JBLU). Shares have added about 12.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is JetBlue due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
JetBlue Posts Q2 Loss, Suffers Weak Load Factor
The airline incurred a loss (excluding 84 cents from non-recurring items) of $2.02 per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of $1.86. Results were hurt by the coronavirus-induced weakness in air-travel demand. However, sentiments were bullish in the year-ago period when the company delivered earnings of 60 cents per share owing to strong air-travel demand.
Moreover, operating revenues of $215 million plunged 89.8% year over year and also lagged the Zacks Consensus Estimate of $220.1 million. This steep year-over-year fall was due to the 91.6% decrease in passenger revenues, which accounted for bulk (79.1%) of the top line. Revenues from other sources declined 39.7% to $45 million.
Notably, revenue per available seat mile (RASM: a key measure of unit revenues) in the reported quarter dropped 32.2% to 8.91 cents. Passenger revenue per available seat mile (PRASM) fell 44.3% to 7.06 cents. Average fare at JetBlue during the quarter increased 50% to $276.35. Yield per passenger mile rose 41.5% year over year to 20.86 cents.
Capacity, measured in available seat miles, contracted 84.9% year over year. Meanwhile, traffic, measured in revenue passenger miles, deteriorated 94.1% due to softness in air-travel demand. Consolidated load factor (percentage of seats filled by passengers) slumped to 33.8% from 86% a year ago as traffic decline was more than the capacity reduction in the reported quarter.
In the second quarter, total operating expenses (on a reported basis) decreased 66.3% year over year, mainly owing to the 94% plummet in aircraft fuel and related taxes. With major part of the fleet remaining grounded/under-utilized, fuel gallons consumed tanked 86.7% to 30 million. Average fuel cost per gallon (including fuel taxes) declined 55.4% year over year to 96 cents. JetBlue’s operating expenses per available seat mile (CASM) shot up more than 100% to 25.9 cents due to capacity cuts. Excluding fuel, the metric escalated more than 100% to 36.95 cents.
JetBlue exited the quarter with cash and cash equivalents of $2,561 million compared with $959 million at the end of 2019. Total debt at the end of the reported quarter was $4,776 million compared with $2,334 million at 2019 end. Including the financial aid under the CARES Act, JetBlue’s liquidity stood at $3.4 billion at the end of the June quarter.
Management stated that due to various measures undertaken to combat the current pandemic-inflicted crisis, the company successfully lowered its cash burn from $18 million per day, on average, during the second half of March to $9 million in May. Average daily cash burn in the second quarter was $9.5 million and the daily cash burn at the end of June was just below $8 million.
Revenues for the third quarter are expected to tumble approximately 80% year over year. Capacity is anticipated to contract at least 45% year over year in the third quarter. JetBlue still expects average daily cash burn for the September quarter in the $7-$9 million band. Average fuel cost per gallon (including fuel taxes) is estimated to be $1.24.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -85.5% due to these changes.
Currently, JetBlue has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise JetBlue has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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