JetBlue takes off after earnings reports

Airlines have had a tough time lately, but consumer favorite JetBlue seems to be one that in continuing to take off. Shares are up after earnings reports show a slight decline for Q2, but after $JBLU gave guidance for Q3, they are seeing a nice jump.

Highlights from JetBlue’s earnings report

Taking a look at the company’s press release, we can glean a few highlights:

  • Revenue per available seat fell 1.2% year / year for the quarter
  • Load factor improved a full percentage point to 86.2%
  • Yield per passenger mile fell 2.2% to $0.1424
  • Spent $2.28 per gallon for fuel, a jump of 42%
  • Average fare was down 0.7% to $170.08

That might not look like the greatest quarter, and you would be correct, but looking at what JetBlue says for Q3:

  • Capacity is increasing 7.5% – 9.5%
  • Cost per seat mile will be increasing a bit, by 1-3%
  • CEO says they are planning adjustments to ancillary revenue (see: baggage fees and amenities like in-flight wifi, such as $GOGO)

JetBlue is still a solid investment choice

People will still be traveling, and JetBlue has a fantastic consumer perception, with some people paying premiums for certain flights just to stay loyal. There is no dividend on this $6 billion market cap company, but with $580 million in revenue, they are no joke.

Long term, JetBlue has also invested in its future, and is even looking at upgrading future planes even further, as it wants to change some of its Airbus orders to longer range A321LR, allowing it expand overseas and longer term flights, all which will help profitability.

After looking at JetBlue, and looking at competitor performance from companies like Alaska Air Group ($ALK), Spirit Airlines ($SAVE), Southwest ($LUV), and United Holdings ($UAL), a fair value for this stock is ~$30 a share, a 53% increase over current trading price. Using an EBITDA multiple analysis, the LTM EBITDA model gives us a 5.5-9.5x range, and settling on the mid-point of the estimate, using a 7.5x multiple. This represents a 53.2% upside to the $19.81 price close as of 7/23/18.

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