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Category: Stock Market and Jetblue Airways
Date: 10 May 2020 Stock Price: $9.09 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Jetblue, a low cost carrier based in Boston that operates over 1000 flights a day. The coronavirus pandemic has hit the group's business hard. Will they survive it?
We entered this crisis with the second strongest balance sheet among U.S. airlines. In the past two months, we have moved quickly to both protect and strengthen our liquidity position" |
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 1st quarter 2020 earnings report
The data below refers to the most recent quarter unless specified otherwise:
A few details regarding JetBlue is shown below
Description 1Q 2020 1Q2019 Percentage change year over year
Departures 83,295 89,236 (6.7)
Average stage length (miles) 1,160 1,153 0.6
Average number of operating aircraft during period 259.1 252.9 2.5
Average fuel cost per gallon, including fuel taxes $1.86 $2.05 (9.3)
Fuel gallons consumed (millions): 197 213 (7.8)
Average number of full-time equivalent crewmembers 18,698 18,292
- Revenues: $1.588 billion (down from $1.871 billion for the same quarter of the previous year)
- Revenue decreased by -15.1% over the last 12 months
- Operating expenses: $1.922 billion (up from $1.795 billion for the same quarter of the previous year)
- Operating expenses increased by 7.1% over the last 12 months
- Some margin squeeze for JetBlue with their revenues declined while operating expenses increased
- Net loss: -$268 million (down from a profit of $42 million for the same quarter of the previous year)
- Diluted loss per share: -$0.97 (down from $0.14for the same quarter of the previous year)
- PE ratio of JetBlue : Since JetBlue is currently making a loss a PE ratio cannot be calculated
- Diluted weighted-average shares outstanding: 277 million (down from 306.9 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.681 billion
- Cash and cash equivalents per share: $6.06
- Cash and cash equivalents makes up 66.7% of JetBlue market capital
- Cash and cash equivalents makes up 13,1% of JetBlue total assets
- Stockholders equity in JetBlue: $4.366 billion
- Stockholders equity per share in JetBlue: $15.76
- JetBlue is trading at 0.58 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.34. Read more about the S&P500 here.
A few details regarding JetBlue is shown below
Description 1Q 2020 1Q2019 Percentage change year over year
Departures 83,295 89,236 (6.7)
Average stage length (miles) 1,160 1,153 0.6
Average number of operating aircraft during period 259.1 252.9 2.5
Average fuel cost per gallon, including fuel taxes $1.86 $2.05 (9.3)
Fuel gallons consumed (millions): 197 213 (7.8)
Average number of full-time equivalent crewmembers 18,698 18,292
JetBlue's management commentary on their 1st quarter 2020 earnings report
NEW YORK--(BUSINESS WIRE)-- JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the first quarter 2020:
I could not be prouder of our JetBlue family – not just over the past two decades – but for their service to each other, our customers, and our communities as they provide an essential service during the coronavirus pandemic,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“We entered this crisis with the second strongest balance sheet among U.S. airlines. In the past two months, we have moved quickly to both protect and strengthen our liquidity position. Since the beginning of March, we have made decisive changes to our growth plan to minimize cash burn, including deep capacity cuts to our schedules. We have now reduced our CAPEX plan by $1.3 billion between now and the end of 2022, and by the end of May, we anticipate we will have lowered our operating expenses by approximately 50% year over year.
As we move towards recovery, we have three priorities. The first is the immediate need to protect the safety of our Crewmembers and Customers. The second is to minimize cash burn. The third priority is to set JetBlue up for future success by restoring Customer confidence, by returning to cash generation, and by rebuilding our margins and balance sheet. We believe that, not only will we get through this crisis, but we will ultimately emerge as a stronger JetBlue. JetBlue has been a force for good for our industry, and we have been resilient through crises for over 20 years.”
Action Plan, Revenue and Capacity
“Our first priority since the onset of the pandemic has been to ensure the safety of our customers and crewmembers. We have responded quickly to changing conditions, and overseen the rapid evolution of policies and programs designed to address the threats to crewmember and customer safety posed by this virus,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer. “Although the overall number of bookings remained extremely limited, we believe that we reached the bottom in terms of demand around mid-April, and expect to have a better sense of third and the fourth quarter of 2020 by early summer.
Our March capacity declined 19% year over year, as a result of scheduled reductions and close-in cancellations. Our working assumption for the second quarter is for capacity to be down about 80% compared to our original plan. While much of our team is focused on navigating the near-term challenges, we are focused on how the business will look for customers and crewmembers as we transition to recovery. We believe our inherent strengths as a trusted brand with an unparalleled culture and superior product will serve us well, as customers evaluate their air travel options. We plan to continue to be thoughtful as we adapt to changing customer needs.”
- Reported GAAP loss per share of ($0.97) in the first quarter of 2020 compared to a diluted earnings per share of $0.14 in the first quarter of 2019. Adjusted loss per share was $0.42(1) in the first quarter of 2020 versus adjusted diluted earnings per share of $0.16(1) in the first quarter of 2019. Note A to this earnings release includes the GAAP to Non-GAAP reconciliation between reported and adjusted diluted earnings per share.GAAP pre-tax loss of ($354) million in the first quarter of 2020, compared to a pre-tax income of $58 million in the first quarter of 2019. Excluding the one-time items, adjusted pre-tax loss of ($152) million(1), versus adjusted pre-tax income of $70 million(1) in the first quarter of 2019.
- GAAP pre-tax margin of (22.3%) in the first quarter of 2020, down 25.4 percentage points from a pre-tax margin of 3.1% in the first quarter of 2019 due to the impact of COVID-19. Adjusted pre-tax margin of (9.5%)(1), a decline of 13.2 percentage points year over year from adjusted pre-tax margin of 3.7%(1), exclusive of the one-time costs.
I could not be prouder of our JetBlue family – not just over the past two decades – but for their service to each other, our customers, and our communities as they provide an essential service during the coronavirus pandemic,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“We entered this crisis with the second strongest balance sheet among U.S. airlines. In the past two months, we have moved quickly to both protect and strengthen our liquidity position. Since the beginning of March, we have made decisive changes to our growth plan to minimize cash burn, including deep capacity cuts to our schedules. We have now reduced our CAPEX plan by $1.3 billion between now and the end of 2022, and by the end of May, we anticipate we will have lowered our operating expenses by approximately 50% year over year.
As we move towards recovery, we have three priorities. The first is the immediate need to protect the safety of our Crewmembers and Customers. The second is to minimize cash burn. The third priority is to set JetBlue up for future success by restoring Customer confidence, by returning to cash generation, and by rebuilding our margins and balance sheet. We believe that, not only will we get through this crisis, but we will ultimately emerge as a stronger JetBlue. JetBlue has been a force for good for our industry, and we have been resilient through crises for over 20 years.”
Action Plan, Revenue and Capacity
“Our first priority since the onset of the pandemic has been to ensure the safety of our customers and crewmembers. We have responded quickly to changing conditions, and overseen the rapid evolution of policies and programs designed to address the threats to crewmember and customer safety posed by this virus,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer. “Although the overall number of bookings remained extremely limited, we believe that we reached the bottom in terms of demand around mid-April, and expect to have a better sense of third and the fourth quarter of 2020 by early summer.
Our March capacity declined 19% year over year, as a result of scheduled reductions and close-in cancellations. Our working assumption for the second quarter is for capacity to be down about 80% compared to our original plan. While much of our team is focused on navigating the near-term challenges, we are focused on how the business will look for customers and crewmembers as we transition to recovery. We believe our inherent strengths as a trusted brand with an unparalleled culture and superior product will serve us well, as customers evaluate their air travel options. We plan to continue to be thoughtful as we adapt to changing customer needs.”
Cost Performance and Outlook
“Thanks to our continued focus in managing JetBlue to investment grade metrics, building a strong balance sheet, improving our cost structure and strengthening our margins, we believe we are in the best position of any time in our 20-year history to effectively weather this crisis and emerge even stronger,” said Steve Priest, JetBlue’s Chief Financial Officer.
“From a financial perspective, we are focusing our efforts over the coming months on three key areas: preserving our liquidity, reducing operating expenses, and managing our capital expenditures. We started the year with $1.3 billion in cash, cash equivalents and short-term investments. By the close of April, our liquidity position reached $3.1 billion, or ~38% of our 2019 revenue, including the payroll support through the CARES act.
In addition to successfully raising liquidity in a short period, we have acted with urgency to minimize our cash burn, reducing our expenses and re-working our plan for capital expenditures. We lowered our cash burn from an average of $18 million per day during the second half of March, to just under $10 million per day by May, excluding proceeds from the Payroll Support Program. We are leaving no stone unturned to protect the financial security of JetBlue.”
“Thanks to our continued focus in managing JetBlue to investment grade metrics, building a strong balance sheet, improving our cost structure and strengthening our margins, we believe we are in the best position of any time in our 20-year history to effectively weather this crisis and emerge even stronger,” said Steve Priest, JetBlue’s Chief Financial Officer.
“From a financial perspective, we are focusing our efforts over the coming months on three key areas: preserving our liquidity, reducing operating expenses, and managing our capital expenditures. We started the year with $1.3 billion in cash, cash equivalents and short-term investments. By the close of April, our liquidity position reached $3.1 billion, or ~38% of our 2019 revenue, including the payroll support through the CARES act.
In addition to successfully raising liquidity in a short period, we have acted with urgency to minimize our cash burn, reducing our expenses and re-working our plan for capital expenditures. We lowered our cash burn from an average of $18 million per day during the second half of March, to just under $10 million per day by May, excluding proceeds from the Payroll Support Program. We are leaving no stone unturned to protect the financial security of JetBlue.”
JetBlue Airways (NASDAQ:JBLU) stock price history
The image below, obtained from Google, 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. 5 years ago the stock of JetBlue was trading at around $21.40 a stock and its currently trading at $9.09. That's a significant loss of -57.5% suffered by JetBlue stockholders over the last 5 years.
JetBlue stock is trading at closer to its 52 week low of $6.61 and far away from its 52 week high of $21.65 which to us is a clear indication that the short term sentiment and momentum of JetBlue Airways stock is very negative at this point in time.
JetBlue stock is trading at closer to its 52 week low of $6.61 and far away from its 52 week high of $21.65 which to us is a clear indication that the short term sentiment and momentum of JetBlue Airways stock is very negative at this point in time.
Recent Google search trends for JBLU stock price
The graphic below shows the Google search trends for JBLU stock price over the last 12 months in the United States as obtained from GoogleTrends. As it shows there has been a significant spike in google searches for JBLU since the start of March 2020. This coincides with a significant decline in the group's stock price due to lockdowns across the world and travel bans being instituted the world over.
Recent coverage of JetBlue
The extract below shows recent coverage of JetBlue as obtained from TheStreet.com
JetBlue Airways (JBLU) reported a wider-than-expected first-quarter loss Thursday, as the budget air carrier saw demand plummet in the face of the coronavirus pandemic. Shares of the Long Island City, New York-based company were rising 2.9% to $8.25. JetBlue reported a net loss of $268 million, or 97 cents a share, down from net income of $42 million, or 14 cents a share, a year ago. Adjusted losses came to 42 cents a share, above the 30-cent loss expected by analysts polled by FactSet.
Revenue totaled $1.59 billion, down 15.1% from a year ago, missing FactSet's call for $1.7 billion in revenue. Revenue suffered a 52% decline in March due to the impact of the coronavirus outbreak, resulting in lower demand volumes and "a very challenging fare environment following a very solid start to the year," the company said.
Read the full article here
JetBlue Airways (JBLU) reported a wider-than-expected first-quarter loss Thursday, as the budget air carrier saw demand plummet in the face of the coronavirus pandemic. Shares of the Long Island City, New York-based company were rising 2.9% to $8.25. JetBlue reported a net loss of $268 million, or 97 cents a share, down from net income of $42 million, or 14 cents a share, a year ago. Adjusted losses came to 42 cents a share, above the 30-cent loss expected by analysts polled by FactSet.
Revenue totaled $1.59 billion, down 15.1% from a year ago, missing FactSet's call for $1.7 billion in revenue. Revenue suffered a 52% decline in March due to the impact of the coronavirus outbreak, resulting in lower demand volumes and "a very challenging fare environment following a very solid start to the year," the company said.
Read the full article here
JetBlue (NASDAQ: JBLU) latest stock valuation
So based on JetBlue 1st quarter 2020 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 $15.76 per stock
We therefore believe that the stock of JetBlue stock is undervalued. 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 $15.76 A good entry price into JetBlue stock would therefore be at $14.20 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 undervalued. 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 $15.76 A good entry price into JetBlue stock would therefore be at $14.20 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 2nd quarter 2020 earnings release in early August 2020