JetBlue Airways Corporation (NASD: JBLU)

Transcription

1 Sep 19, 2016 JetBlue Airways Corporation (NASD: JBLU) $17.15 USD ( As of 09/16/16 ) Zacks Rank 3-Hold Style:Value: Growth: Momentum: VGM: Data Overview 52 Week High-Low $ $ Day Average Volume 5,858,738 Beta 0.44 Market Cap 5.55 B Dividend / Div Yld $0.00 / 0.00% Industry TRANS-AIRLINE Industry Rank 208 / 265 (Bottom 22%) Current Ratio 0.80 Debt/Capital 26.% Net Margin 11.73% Price/Book (P/B) 1.56 Summary We are impressed by the strong August traffic report of JetBlue Airways. Moreover, the carrier s bullish unit revenue forecast for the third quarter is encouraging. We are also positive on the U.S. DOT s decision to grant final approval to eight carriers, including JetBlue, to initiate commercial flights to Havana. The approval was gained on the same day the first U.S. flight landed in Cuba in more than 50 years. The flight from Fort Lauderdale to Santa Clara was operated by JetBlue. However, we remain concerned about headwinds like the surge in terror attacks and uncertainty following Brexit, to name a few. Moreover, the company s failure to seal the deal to buy Virgin America has dealt a blow to its expansion plans. Elements of the Zacks Rank Agreement Estimate Revisions ( days) Price/Cash Flow (P/CF) 3.76 Earnings Yield 12.21% 100% % 100% % Debt/Equity 0.36 Value Score Q1 (Current Qtr) Q2 (Next Qtr) F1 (Current Year) F2 (Next Year) P/E (F1) 8.00 P/E (F1) Rel to Industry Revisions: 5 Up: 5 Down: 0 Revisions: 5 Up: 2 Down: 3 Revisions: 6 Up: 6 Down: 0 Revisions: 5 Up: 2 Down: 3 PEG Ratio 2.59 P/S (F1) 0.84 Magnitude Consensus Estimate Trend ( days) P/S (TTM) 0.85 P/CFO 3.76 P/CFO Rel to Industry 1.15 EV/EDITDA Annual 4.94 Growth Score Q % Q2-2.22% F % F2-6.76% Proj. EPS Growth (F1/F0) 10.90% Hist. EPS Growth (Q0/Q-1) 4.15 Upside Zacks Consensus Estimate vs. Most Accurate Estimate Qtr CFO Growth Yr CFO Growth 1, Return on Equity (ROE) 2,283.90% (NI - CFO) / Total Assets Asset Turnover 0.69 Momentum Score Most Accurate: 0.58 Zacks Consensus: 0.57 Q1 1.75% Most Accurate: 0.44 Zacks Consensus: 0.44 Q2 0.00% Most Accurate: 2.15 Zacks Consensus: 2.14 F1 0.47% Most Accurate: 1.90 Zacks Consensus: 1.93 F2-1.55% 1 week Volume change 18.92% Surprise Reported Earnings History 1 week Price Cng Rel to Industry 9.57% (F1) EPS Est 1 week change 0.18% (F1) EPS Est 4 week change 0.72% (F1) EPS Est 12 week change -1.44% (Q1) EPS Est 1 week change 0.44% Reported: 0.53 Estimate: 0.49 Reported: 0.59 Estimate: 0.53 Reported: 0.56 Estimate: 0.51 Reported: 0.58 Estimate: 0.57 Average 4 Qtr Surprise Q End 06/16 Q End 03/16 Q End 12/15 Q End 09/ Zacks Investment Research, All Rights Reserved 10 S. Riverside Plaza Suite 10 Chicago, IL 6

2 The data on the front page and all the charts in the report represent market data as of 09/16/16, while the reports text is as of 09/19/2016 Overview JetBlue Airways Corporation, incorporated in Delaware in Aug 1998, is a passenger airline that focuses on providing highquality customer service. The low-fare, low-cost carrier operates primarily on point-to-point routes. It transports more than 32 million customers annually to 87 cities in the U.S., Caribbean and Latin America with an average of 850 daily flights. The Long Island City, New York based company reported operating revenues of $6.4 billion in 2015, up 10.3%. Passenger revenues accounted for bulk of the total revenues. Zacks Equity Research: JBLU Page 2 of 7

3 Reasons To Buy: JetBlue reported better-than-expected earnings and revenues in the second quarter. Earnings improved substantially from the year-ago figure, aided by low fuel costs. The top line was benefitted by a 35.2% increase in other revenues. The stock will be benefitted immensely if it continues to deliver strong earnings reports. We are impressed by the company s bullish guidance for total revenue per available seat mile (RASM: a key measure of unit revenue) for the third quarter. The carrier expects RASM for the third quarter to decline 3 4% year over year. This marks an improvement from the 8.2% decline witnessed in the second quarter. Shares of the company surged following the bullish guidance. We are impressed by the company s bullish guidance for total revenue per available seat mile for the third quarter. JetBlue had the honor of operating the first U.S. flight to a Cuban city in more than 50 years. On Aug 31, the carrier s flight (387) landed in Santa Clara from Fort Lauderdale. On the same day, the U.S. DOT granted final approval to eight carriers including JetBlue to initiate commercial flights to Havana. We are positive on the decision and believe that, once operational, JetBlue s top line will be benefitted immensely by the new route additions as Havana is a favorite tourist spot. The carrier gained approval to operate 27 flights per week from New York, Fort Lauderdale and Orlando. The carrier s efforts to expand in Boston are also encouraging. The company has also been working on revamping its fleet. The low-cost carrier announced plans to expand its Mint experience by amending its purchase agreement with Airbus. To modernize its fleet, JetBlue aims to introduce additional A321 aircraft over a period of seven years. Airbus is scheduled to deliver 15 incremental A321ceos to JetBlue from Thus the company is expected to see attract higher number of customers with these new offerings. Reasons To Sell: Increase in maintenance costs remains a major headwind for the company and a large part of this increase is due to the higher cost associated with the use of older E190 fleet and CF34 engines. With increasing labor costs, the bottom-line stands to be adversely impacted. Additionally, higher depreciation due to higher IT infrastructure spending and higher landing fees could drag margins down. Headwinds like the surge in terror attacks continue to hurt the stock. The global airline industry continues to face challenges from the soft economic recovery, offsetting the positive impacts of increasing air travel demand within the domestic market. On the other hand, the domestic airline industry faces the risks of high fixed expenses and stiff price competition. JetBlue competes with other players with respect to routes, services, fares, flight schedules, types of aircraft, code-sharing relationships, capacity, in-flight entertainment systems and frequent flyer programs Sector participants including JetBlue have been hurt by the decline in business travel following the Brexit vote. Moreover, in April JetBlue suffered a major blow when it lost the bidding war to Alaska Air Group pertaining to the deal to buy Virgin America. Moreover, the surge in terror attacks has hurt airline stocks like JetBlue as travel demand has fallen due to security fears. Last Earnings Report JetBlue Gains on Q2 Earnings Beat, PRASM Woes Stay JetBlue Airways Corporation s second-quarter 2016 earnings (excluding special items) of $0.53 per share beat the Zacks Consensus Estimate of $0.49. Earnings improved substantially from the year-ago figure, aided by low fuel costs. Total operating revenue climbed 2% year over year to $1,643 million, beating the Zacks Consensus Estimate of $1,635 million. Quarter Ending 06/2016 Report Date Jul 26, 2016 Sales Surprise 0.50% EPS Surprise 8.16% Quarterly EPS 0.53 Annual EPS (TTM) 2.26 The top line was benefitted by a 35.2% increase in other revenues. Passenger revenues in the quarter under review decreased 0.6% year over year to $1,487 million. Operating Statistics Capacity, measured in available seat miles, expanded 11.1% year over year while traffic measured in revenue passenger miles grew 10.3% in the second quarter. Load factor (percentage of seats filled by passengers) edged down basis points (bps) year over year to 85% in the reported quarter as capacity expansion outpaced traffic growth. Yield per passenger mile fell 9.9% year over year to $ in the reported quarter. Passenger revenue per available seat mile (PRASM) plummeted 10.5% on an annual basis to $ while operating revenue per available seat mile (RASM) decreased 8.2% to $ Operating Income and Expenses In the second quarter of 2016, total operating expenses were flat year over year on a reported basis. Average fuel cost per gallon, inclusive of fuel taxes, declined 32.8% to $1.43 per gallon. JetBlue s operating expense per available seat mile (CASM) decreased 9.9% in the reported quarter to $ Excluding fuel and profit sharing, the metric decreased 1% to $ Balance Sheet Zacks Equity Research: JBLU Page 3 of 7

4 JetBlue ended the second quarter of 2016 with cash and cash equivalents of $935 million compared with $318 million at the end of Total debt, at the end of same quarter, was $1,746 million compared with $1,827 million at the end of The debt to capitalization ratio at the end of the quarter was 32.4% compared with 36.3% at the end of Guidance For the third quarter of 2016, the carrier expects capacity to increase in the band of 5.5% to 7.5%. For full-year 2016, the metric is still expected to increase in the range of 8% to 9.5%. Consolidated operating cost per available seat mile, excluding fuel and profit sharing, is expected to grow in the band of 1% to 3% in the third quarter of For full-year 2016, the metric is still expected to remain flat or grow up to 1.5%. Other Development The low-cost carrier announced plans to expand its Mint experience by amending its purchase agreement with Airbus. To modernize its fleet, JetBlue aims to introduce additional A321 aircraft over a period of seven years, per the agreement. The move is aimed to strengthen its presence in transcontinental markets. Airbus is scheduled to deliver 15 incremental A321ceos to JetBlue from Starting 2020, the low-cost carrier s fleet should be bolstered by the addition of 15 A321neos. Recent News Aug Traffic Sep 13, 2016 jetblue posted a significant increase in traffic for August. Revenue passenger miles (RPMs) a measure of traffic climbed 6.2% on a year-over-year basis to 4.21 billion. Average seat miles (ASMs) a measure of capacity grew 5.7% to 4.82 billion in Aug Load factor increased 40 basis points to 87.4% in the month as traffic growth outpaced capacity expansion. Third-Quarter Guidance JetBlue expects RASM for the third quarter to decline 3 4% year over year. This marks an improvement from the 8.2% decline in the second quarter. The company maintained its third-quarter guidance for capacity growth in the band of %. Capacity for 2016 is still projected to increase in the range of 8% to 9.5%. CFO Resigns Sep 13, 2016 JetBlue announced that its Chief Financial Officer (CFO) and executive vice president, Mark Powers, will retire on Nov 1, Nonetheless, Powers will remain associated with the company as an advisor for a year after his retirement. The company s current Vice President and treasurer, Jim Leddy, will assume the role of interim CFO, subject to approval by the company s board of directors. Cuba Update- Aug 31, 2016 JetBlue operated the first U.S. commercial flight to Cuba in more than fifty years. On the same day, the U.S. DOT granted final approval to eight carriers including JetBlue to initiate commercial flights to Havana. The carrier gained approval to operate 27 flights per week from New York, Fort Lauderdale and Orlando. Zacks Equity Research: JBLU Page 4 of 7

5 Industry Analysis Zacks Industry Rank: 208 / 265 (Bottom 22%) Top Peers AMER AIRLINES (AAL) AIR FRANCE-ADR (AFLYY) AIR CHINA LTD (AIRYY) ALLEGIANT TRAVL (ALGT) ALASKA AIR GRP (ALK) ANA HOLDINGS (ALNPY) BRISTOW GROUP (BRS) CHINA EASTN-ADR (CEA) COPA HLDGS SA-A (CPA) Industry Comparison Trans-airline Position in Industry: 4 of 25 Industry Peers JBLU Market Cap 5.67 B # of Analysts 7 Dividend Yield 0.00% Growth Score Hist. EPS Growth (3-5 yrs) 10.90% Proj. EPS Growth (F1/F0) 9.11% Curr. Cash Flow Growth 83.48% Hist. Cash Flow Growth (3-5 yrs) 25.% Current Ratio 0.80 Debt/Capital 26.% Net Margin 11.73% Return on Equity 2,283.90% Sales/Assets 0.69 Proj. Sales Growth (F1/F0) 2.% Value Score Cash/Price EV/EBITDA 4.94 PEG Ratio 2.59 Price/Book (P/B) 1.56 Price/Cash Flow (P/CF) 3.76 P/E (F1) 8.00 Price/Sales (P/S) 0.84 Earnings Yield 12.21% Debt/Equity 0.36 Cash Flow ($/share) 3.24 Momentum Score Daily Price Chg 2.04% 1 Week Price Chg 9.57% 4 Week Price Chg 5.29% 12 Week Price Chg 7.61% 52 Week Price Chg % 20 Day Average Volume 5,858,738 (F1) EPS Est Wkly Chg 0.18% (F1) EPS Est Mthly Chg 0.72% (F1) EPS Est Qtrly Chg -1.44% (Q1) EPS Est Mthly Chg 0.29% X Industry S&P B B % 1.74% % 7.52% 9.11% 7.26%.71% 4.41% 6.97% 8.09% % 42.32% 8.36% 9.57% 25.51% 15.90% % 2.75% % 5.35% % 0.96% 1.07% -0.03% -0.71% -2.44% -2.66% -0.06% % 7.23% 176, % 0.00% 0.00% 0.03% -3.96% 0.88% 0.00% 0.00% AAL AFLYY AIRYY B 1.64 B 3.26 B % 0.00% 1.77% NA 0.41 NA 4.47 NA NA NA 14.75% 32.72% 21.82% % % % % % % 40.35% 27.08% NA NA -4.06% % % 96.28% 54.59% 16.50% 2.51% NA % 74.28% NA % 0.00% 0.00% 0.05% 0.09% 0.00% -3.96% -4.87% -0.38% -0.71% -4.12% -9.61% 20.05% % 2.88% % % -9.09% 7,592,936 14, % 0.00% 0.00% 0.09% -3.76% 0.00% -3.96% % 0.00% 0.% NA NA Zacks Equity Research: JBLU Page 5 of 7

6 Zacks Rank Education The Zacks Rank is calculated from four primary inputs: Agreement, Magnitude, Upside and Surprise. Agreement This is the extent which brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of estimates being revised higher, the better the score for this component. For example, if there were 10 estimate revisions over the last days, with 8 of those revisions up, and the other 2 down, then the agreement factor would be 80% positive. If, however, 8 were to the downside with only 2 of them up, then the agreement factor would be 80% negative. The higher the percentage of agreement the better. Magnitude This is a measure based on the size of the recent change in the current consensus estimates. The Zacks Rank looks at the magnitude of these changes over the last days. In the chart to the right, the display shows the consensus estimate from -days ago, -days ago, 7-days ago, and the most current estimate The difference between the current estimate and the estimate from -days ago is displayed as a percentage. A larger positive percentage increase will score better on this component. Upside This is the difference between the most accurate estimate, as calculated by Zacks, and the consensus estimate. For example, a stock with a consensus estimate of $1.00, and a most accurate estimate of $1.05 will have an upside factor of 5%. This is not an indication of how much a stock will go up or down. Instead, it's a measure of the difference between these two estimates. This is particularly useful near earnings season as a positive upside percentage can be used to help predict a future surprise. Surprise The Zacks Rank also factors in the last few quarters of earnings surprises. Companies that have positively surprised in the recent past have a tendency of positively surprising again in the future (or missing if they recently missed). A stock with a recent track record of positive surprises will score better on this factor than a stock with a history of negative surprises. These stocks will have a greater likelihood of positively surprising again. Zacks Style Score Education The Zacks Style Score is as a complementary indicator to the Zacks Rank, giving investors a way to focus on the best Zacks Rank stocks that best fit their own stock picking preferences. Academic research has proven that stocks with the best Growth, Value, and Momentum characteristics outperform the market. The Zacks Style Scores rate stocks on each of these individual styles and assigns a rating of A, B, C, D and F. An A, is better than a B; a B is better than a C; and so on. Value Score Growth Score Momentum Score VGM Score As an investor, you want to buy stocks with the highest probability of success. That means buying stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Style Score of an A or a B. Zacks Equity Research: JBLU Page 6 of 7

7 Disclosures The analysts contributing to this report do not hold any shares of this stock. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts' personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. Zacks Equity Research: JBLU Page 7 of 7