JetBlue Airways (JBLU) Q4 earnings preview: Traffic growth could offset margin pressure

JetBlue Airways Corporation (NASDAQ: JBLU) is slated to report its earnings results for the fourth quarter of 2019 on Thursday before the market opens. The margin pressure is likely to continue to impact the results but the holiday season is expected to increase the passenger traffic for the quarter.

The fuel consumption could rise due to the higher average number of aircraft operating while the average fuel price could fall for the quarter. The expenses could rise due to additional aircraft acquisition, fleet ages and the frequency of flights in existing markets as well as new markets expansion. The company plans to remain intensely focused on cost discipline.

The airline business is capital intensive. The company’s ability to successfully execute growth plans is largely dependent on the continued availability of capital on attractive terms. In addition, the ability to successfully operate its business depends on maintaining sufficient liquidity. JetBlue believes it has adequate resources from a combination of cash and cash equivalents, investment securities on hand, and two available lines of credit.

In 2019, for the delivery of scheduled aircraft, the company could use a mix of cash and debt financing. During the fourth quarter, domestic trends are likely to remain steady. The company believes that its plan to strengthen the unit revenues into 2020 could return it to positive RASM growth.

Analysts expect the company’s earnings to increase by 8% to $0.54 per share and revenue will rise by 2.90% to $2.03 billion for the fourth quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “hold” rating with an average price target of $21.87.

Read: Delta Air Lines Q4 earnings review

For the third quarter, JetBlue reported better-than-expected earnings backed mainly by a marked increase in passenger traffic. The company is just beginning to see the benefits of revenue, cost, fleet, and capital allocation efforts with additional opportunities ahead of the company.

For the fourth quarter, the company expects capacity growth of 4.5-6.5% and revenue per available seat miles to decline 3.5-0.5%. CASM ex-fuel is predicted to be down 1% to up 1% for the fourth quarter and to increase 0.5-1% for the full year 2019. For 2019, capacity growth is estimated to be 6-7%. The company remains on track to deliver on the goal of $2.50-3.00 EPS in 2020 despite certain near-term pressures on revenue in international markets and NEO delays.

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