Overview of JetBlue Airways (JBLU) earnings release for the 4th quarter of their 2021 fiscal year
Category: Jetblue Airways (JBLU)
Date: 27 January 2022 Stock Price of JetBlue (JBLU) : $13.88 Market Capital of JetBlue: $4.41 billion We take a look at the 4th quarter earnings release of their 2021 fiscal year of Jetblue, a low cost carrier based in Boston that operates over 1000 flights a day. For the 4th quarter the group reported revenue of $1.84 billion and they recorded an operating loss of-$119 million
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While Omicron has temporarily weighed on demand in the very near-term, we expect sequential month-on-month improvement through the quarter, ultimately returning to sustained profitability in the spring and beyond. Furthermore, were it not for Omicron, we believe we would have generated higher revenue this quarter than in the first quarter of 2019 - Robin Hayes, JetBlue’s Chief Executive Officer."
About Jetblue Airways
JetBlue is New York's Hometown Airline®, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles (Long Beach), Orlando, and San Juan. JetBlue carries more than 42 million customers a year to nearly 100 cities in the U.S., Caribbean, and Latin America with an average of more than 1,000 daily flights
Overview of JetBlue 4th quarter 2020 earnings report
Operational and Financial Highlights from the Fourth Quarter
Balance Sheet and Liquidity
- Capacity declined by 5.4% year over two, in-line with our planning assumption of a 4% to 7% decline, year over two.
- Revenue declined 9.7% year over two, compared to our planning assumption of an 8% to 13% decline year over two. This was within the range of our initial assumptions despite a late quarter impact from the Omicron wave, driven by strong holiday peaks.
- Operating expenses per available seat mile increased 14.4% year over two. Operating expenses per available seat mile, excluding fuel and special items (CASM ex-fuel) (1) increased 16.3%(1) year over two. Consistent with the industry, our cost performance was impacted by incremental incentives and premium pay tied to the Omicron surge in case counts and the resulting operational impact, worth approximately two points of CASM ex-fuel in the quarter.
- Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Special Items (Adjusted EBITDA) in the fourth quarter of 2021 was $31 million(1), towards the better end of our planning assumption range of ($50) to $50 million.
Balance Sheet and Liquidity
- As of December 31, 2021, JetBlue’s adjusted debt to capital ratio was 53%(1).
- JetBlue ended the fourth quarter of 2021 with approximately $2.8 billion in unrestricted cash, cash equivalents, and short-term investments, or 35% of 2019 revenue. This excludes our $550 million undrawn revolving credit facility.
- JetBlue paid down approximately $100 million in regularly scheduled debt and finance lease obligations, and prepaid approximately $20 million in bank loans.
JetBlue's management commentary on their 4th quarter 2021 earnings report
NEW YORK--(BUSINESS WIRE)-- JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the fourth quarter of 2021:
“While Omicron has temporarily weighed on demand in the very near-term, we expect sequential month-on-month improvement through the quarter, ultimately returning to sustained profitability in the spring and beyond. Furthermore, were it not for Omicron, we believe we would have generated higher revenue this quarter than in the first quarter of 2019,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“I firmly believe that 2022 will prove to be a transformational year for JetBlue's structural profitability, as we look to restore our earnings power and create value for our stakeholders. And we plan to achieve this by pulling meaningful commercial levers, keeping our relentless focus on costs, and maintaining our measured approach to capital allocation.”
- Reported GAAP loss per share of ($0.40) in the fourth quarter of 2021 compared to diluted earnings per share of $0.56 in the fourth quarter of 2019. Adjusted loss per share was ($0.36)(1) in the fourth quarter of 2021 versus adjusted diluted earnings per share of $0.56(1) in the fourth quarter of 2019.
- GAAP pre-tax loss of ($163) million in the fourth quarter of 2021, compared to a pre-tax income of $220 million in the fourth quarter of 2019. Excluding one-time items, adjusted pre-tax loss of ($145) million(1) in the fourth quarter of 2021 versus adjusted pre-tax income of $221 million(1) in the fourth quarter of 2019.
“While Omicron has temporarily weighed on demand in the very near-term, we expect sequential month-on-month improvement through the quarter, ultimately returning to sustained profitability in the spring and beyond. Furthermore, were it not for Omicron, we believe we would have generated higher revenue this quarter than in the first quarter of 2019,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“I firmly believe that 2022 will prove to be a transformational year for JetBlue's structural profitability, as we look to restore our earnings power and create value for our stakeholders. And we plan to achieve this by pulling meaningful commercial levers, keeping our relentless focus on costs, and maintaining our measured approach to capital allocation.”
Revenue and Capacity
“The surge in case counts disproportionately impacted the Northeast, hitting New York particularly hard, driving increased Customer cancellations and bookings softness during the most significant revenue weeks of the quarter, and also led to some Crew-related cancellations. Despite all of these challenges, our underlying revenue performance was very strong, which keeps us optimistic about the future as we continue to ramp up hiring efforts towards a fully staffed operation,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.
“For the first quarter of 2022, we expect revenue to decrease between 11% and 16% year over three. This sequential slowdown reflects the large negative impact from Omicron on Q1 demand. However, trends have largely stabilized and are improving across all geographies. As quickly as the Omicron variant swept through the Northeast, we are seeing cases rapidly decline and we expect sequential month-on-month improvement leading to a profitable Q2 and a very strong summer peak.
For the first quarter of 2022, we expect capacity to range between (1%) and 2% year over three. For the full-year 2022, we are planning to grow capacity between 11% and 15% versus 2019 as we bring aircraft utilization back towards pre-pandemic levels, while retaining flexibility. We expect the demand recovery to regain steam following the temporary setback tied to the Omicron variant. We’ll continue to be nimble and react to the environment.”
Financial Performance and Outlook
“We’re confident that we’re on a path to sequential pre-tax margin improvement with sustained profitability in the spring and beyond. We expect to achieve greater operating leverage as we grow revenue while continuing to improve our unit cost performance,” said Ursula Hurley, JetBlue’s Chief Financial Officer.
“For the first quarter of 2022, we estimate CASM ex-fuel(2) will increase between 13% to 15% year over three. For the full-year 2022, we expect CASM ex-fuel(2) to increase in the range of 1% to 5% versus 2019. We expect elevated unit costs in the first half, followed by a meaningful improvement in the second half of the year as we plan for our network, operation, and aircraft utilization to settle into a ‘new normal’ with optimal staffing levels, along with the ramp of our planned cost initiatives.
For the full-year, we have repaid a total of approximately $1.9 billion of debt. Our balance sheet continues to be among the strongest in the industry, and we’ll continue our balanced approach to capital allocation to drive shareholder value.”
“The surge in case counts disproportionately impacted the Northeast, hitting New York particularly hard, driving increased Customer cancellations and bookings softness during the most significant revenue weeks of the quarter, and also led to some Crew-related cancellations. Despite all of these challenges, our underlying revenue performance was very strong, which keeps us optimistic about the future as we continue to ramp up hiring efforts towards a fully staffed operation,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.
“For the first quarter of 2022, we expect revenue to decrease between 11% and 16% year over three. This sequential slowdown reflects the large negative impact from Omicron on Q1 demand. However, trends have largely stabilized and are improving across all geographies. As quickly as the Omicron variant swept through the Northeast, we are seeing cases rapidly decline and we expect sequential month-on-month improvement leading to a profitable Q2 and a very strong summer peak.
For the first quarter of 2022, we expect capacity to range between (1%) and 2% year over three. For the full-year 2022, we are planning to grow capacity between 11% and 15% versus 2019 as we bring aircraft utilization back towards pre-pandemic levels, while retaining flexibility. We expect the demand recovery to regain steam following the temporary setback tied to the Omicron variant. We’ll continue to be nimble and react to the environment.”
Financial Performance and Outlook
“We’re confident that we’re on a path to sequential pre-tax margin improvement with sustained profitability in the spring and beyond. We expect to achieve greater operating leverage as we grow revenue while continuing to improve our unit cost performance,” said Ursula Hurley, JetBlue’s Chief Financial Officer.
“For the first quarter of 2022, we estimate CASM ex-fuel(2) will increase between 13% to 15% year over three. For the full-year 2022, we expect CASM ex-fuel(2) to increase in the range of 1% to 5% versus 2019. We expect elevated unit costs in the first half, followed by a meaningful improvement in the second half of the year as we plan for our network, operation, and aircraft utilization to settle into a ‘new normal’ with optimal staffing levels, along with the ramp of our planned cost initiatives.
For the full-year, we have repaid a total of approximately $1.9 billion of debt. Our balance sheet continues to be among the strongest in the industry, and we’ll continue our balanced approach to capital allocation to drive shareholder value.”
JetBlue Airways (JBLU) stock price chart over the last 5 years
The image below shows the stock price history of JetBlue Airways (NASDAQ:JBLU) over the last 5 years. And it's been a horrible time for JetBlue stockholders. As is the case for the stockholders of most airline firms . Over the last 5 years the stock of JetBlue declined by -30.3% over the last 5 years.
JetBlue stock is trading at close to the midpoint between its 52 week high and its 52 week low which to us is an indication that the short term sentiment and momentum of JetBlue's stock is neutral at this point in time.
JetBlue stock is trading at close to the midpoint between its 52 week high and its 52 week low which to us is an indication that the short term sentiment and momentum of JetBlue's stock is neutral at this point in time.
JetBlue (JBLU) vs Southwest (LUV) vs Delta (DAL) stock over last 5 years
The image below shows the stock price performance of JetBlue (JBLU) vs Southwest (LUV) vs American (AAL) vs United (UAL) over the last 3 years. The summary below shows the stock price returns of the various airlines below (sorted from best to worst performers)
So looking at the performance of these three airliners, the stock performance of all three are very similar. Delta was the best performer, narrowing beating Southwest and JetBlue the worst performer over the last 5 years.
- Southwest Airlines (LUV): -26.06%
- Delta Airlines (DAL): -24.7%
- JetBlue (JBLU): -30.3%
So looking at the performance of these three airliners, the stock performance of all three are very similar. Delta was the best performer, narrowing beating Southwest and JetBlue the worst performer over the last 5 years.
JetBlue (JBLU) latest stock valuation
So based on JetBlue 4th quarter 2021 earnings report what do we value JetBlue stock at? Based on JetBlue's earnings reported and the fact that they are loss making we have decided to value the stock of JetBlue at their stockholders equity per share which is $12.40 per stock
We therefore believe that the stock of JetBlue stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $12.40. A good entry price into JetBlue (JBLU) stock would therefore be at $11.20 or below.
We expect the stock of JetBlue to tick up nicely if the US economy starts opening up again and people start travelling between states again on a regular basis. While the current operating environment will burn through their cash reserves, but if things return to relatively normal any time soon the group should be able to ride out the current crises engulfing global economies and in particular the airline and tourism industry
We therefore believe that the stock of JetBlue stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $12.40. A good entry price into JetBlue (JBLU) stock would therefore be at $11.20 or below.
We expect the stock of JetBlue to tick up nicely if the US economy starts opening up again and people start travelling between states again on a regular basis. While the current operating environment will burn through their cash reserves, but if things return to relatively normal any time soon the group should be able to ride out the current crises engulfing global economies and in particular the airline and tourism industry
Next earnings release of JetBlue Airways
It is expected that JetBlue will release their 1st quarter 2022 earnings release in late April 2022