Categories Analysis, Other Industries

JetBlue looks to spread wings this year as traffic rebounds. Is the stock a buy?

The airline is scheduled to publish its fourth-quarter results on January 26, before the opening bell.

JetBlue Airways Corporation (NASDAQ: JBLU) has carved a niche for itself in the aviation space with affordable fares and operational efficiency that made it the preferred airline for many budget travelers. For the company, 2023 could be a turnaround year as it looks to return to sustainable profitability, leveraging the ongoing recovery in passenger traffic.

The Stock

JetBlue’s stock made a short-lived recovery after suffering a big loss in the early days of the pandemic, but it retreated and languished in the single-digit territory for most of last year. Though investor sentiment improved since the last earnings report amid positive cues on long-term profitability, JBLU has a long way to go before creating meaningful shareholder value.


Read management/analysts’ comments on JetBlue’s Q3 2022 earnings


The aviation industry got a much-need boost last year as passenger traffic increased steadily after the withdrawal of COVID-related travel curbs. For JetBlue shareholders, however, it’s time to remain patient and see how things shape up this year. It is not a good idea to sell the stock at such low prices. When it comes to buying, uncertainties at the operational and macro levels make the stock a risky bet. Experts warn that JBLU might stay near the current levels through year-end.

Flying High

JetBlue is probably the most popular low-cost airline in America, but it provides passengers with good facilities and operates a relatively young aircraft fleet. The next two years would be crucial for the company considering the management’s initiatives to grow in scale, including the upcoming acquisition of Spirit Airlines. The $3.8-billion deal would make the company the fifth-largest airline while allowing it to enhance its competitive position. Also, plans are afoot to further expand the alliance with American Airlines.

JetBlue-Q3-2022-Earnings-Infographic

Meanwhile, it would be a challenging task for the company to improve margins, given the elevated operating costs led by record-high fuel prices. Efforts are on to tackle the unfavorable cost environment through the management’s structural cost program that envisages driving $250 million of cost savings by 2024.

Financials

Analysts estimate that JetBlue turned to a profit of $0.21 per share in the quarter that ended December 2022, reflecting the improvement in operating conditions from the year-ago quarter when the company incurred a loss. Fourth-quarter earnings benefitted from an estimated 31% growth in revenues to $2.41 billion. The report is slated for release on January 26. In the third quarter, the company registered its first profit in about three years – after being hit by the COIVD-induced travel slump. Revenues jumped to $2.5 billion year-over-year, resulting in an adjusted profit of $0.21 per share.

From JetBlue’s Q3 2022 earnings call:

“We’ve made excellent strides on hiring, and we’re now at a point where we believe we are appropriately resourced from a staffing perspective, which in turn should translate to improved productivity. Looking ahead, we expect our momentum to continue through another solid quarter of mid-single-digit pretax margins in the fourth quarter. We’ll look to build margins further in 2023 as we continue to restore our pre-pandemic earnings power. We continue to see a very healthy revenue environment with no signs of slowing demand for air travel.”


American Airlines is set to gain altitude in 2023. Here’s why


JBLU’s performance has been encouraging this year, making small but steady gains so far. At $8.70, on Monday the stock traded close to where it stood six months ago.

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