Categories Analysis, Industrials

JBLU Stock: Is JetBlue Airways a good buy after Q1 earnings?

JetBlue recently made an unsolicited offer to acquire budget carrier Spirit Airline for $33 per share

After suffering one of the biggest setbacks in history, the airline industry is slowly coming out of the COVID crisis as travel demand recovers across markets. JetBlue Airways Corporation (NASDAQ: JBLU), which has been reporting negative earnings ever since travel restrictions came about two years ago, is striving to regain momentum through initiatives like capacity adjustments and continued investment in the business.

Stock Dips

The company’s performance, in general, improved in recent quarters as the pressure on revenues eased amid the rebound in travel demand. The stock is currently trading at the lowest level in about a year and lost further following this week’s earnings release. Investor sentiment was hurt mainly by the management’s decision to moderate capacity expansion in view of the rising fuel prices.

Read management/analysts’ comments on JetBlue’s Q1 2022 earnings

Though revenues and cash flow improved significantly, there is no sign of the company returning to profitability in the near term. The lingering COVID uncertainty remains a drag on JetBlue’s prospects, which makes the stock a risky investment right now. It is better to wait until a clearer picture emerges before investing, while those who own the stock should consider holding it for the time being. JBLU is likely to make decent gains this year and come out of the slump, but it might still underperform the board market.

JetBlue Q1 2022 earnings infographic

Bullish View

JetBlue executives are confident of a meaningful recovery in the coming quarters, though at a slow pace due to the persisting pandemic risks and re-emergence of the virus in certain areas, especially in New York – the company’s main market. In spite of that, travel demand is rising steadily across all markets, justifying the management’s bullish outlook.  

“To help restore our operational reliability, we are reducing our capacity growth even further, as we plan more conservatively for the summer and make investments to de-risk the operation. These actions will create more resiliency in the operation and set us up for better May and an even better June and strong summer peak. While our return to profitability has likely been pushed out by a quarter, we’re confident that this reset puts us on the right path,” said JetBlue’s CEO Robin Hayes during his post-earnings conference call.

Q1 Outcome

In the early months of 2022, JetBlue’s revenues more than doubled across the board to $1.73 billion but fell short of expectations. But the latest number was below the 2019 levels, which is considered a more relevant comparison. The performance was almost similar to that of peers like United Airlines Holdings, Inc. (NYSE: UAL) and American Airlines Group Inc. (NASDAQ: AAL). The company incurred a loss of $0.80 per share, excluding one-off items, in the first quarter.

Delta Air Lines: Three noteworthy points from the Q1 earnings report

Earlier this month, JetBlue’s management made an unsolicited offer to acquire budget carrier Spirit Airlines Inc. (NYSE: SAVE) for $33 per share. The transaction, which is reportedly being considered favorably by the Spirit management, is expected to unlock significant growth for JetBlue across the U.S., Caribbean, and Latin America.

JetBlue’s stock experienced significant volatility in recent months and lost about 24% since the beginning of 2022. It ended the last trading session lower.

Will the Airline Industry Evolve or Die After the Black Swan-ish Disruption?

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