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Category: Stock Market and Jetblue Airways
Date: 29 July 2020 Stock Price of JetBlue: $10.35 We take a look at the 2nd 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, with revenues for the quarter being down -89.8% compared to the same quarter of the previous year and recording a loss for the quarter of -$320 million.
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We continue to manage through this fluid environment with a near-term focus on preserving liquidity. Just as importantly, we are positioning JetBlue to thrive as we emerge from the pandemic - Steve Priest, JetBlue’s Chief Financial 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 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 2Q 2020 2Q2019 Percentage change year over year
Average fare: $ 276.35 $184.24 50.0
Available seat miles (ASM) 2,413 16,029 -84.9
Yield per passenger mile (cents) 20.86 14.74 41.5
Passenger revenue per ASM (cents) 7.06 12.68 -44.3
Revenue per ASM (cents) 8.91 13.14 -32.6
Operating expense per ASM (cents) 25.9 11.58 123.7
- Revenues: $215 million (down from $2.105 billion for the same quarter of the previous year)
- Revenue decreased by -89.8% over the last 12 months
- Operating expenses: $625 million (down from $1855 billion for the same quarter of the previous year)
- Operating expenses decreased by -66.3% over the last 12 months
- Net loss: -$320 million (down from a profit of $179 million for the same quarter of the previous year)
- Diluted loss per share: -$1.18 (down from $0.59 for 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: 271.7 million (down from 301.8 million for the same quarter of the previous year)
- Cash and cash equivalents: $2.561 billion
- Cash and cash equivalents per share: $9.42
- Cash and cash equivalents makes up 90.7% of JetBlue market capital
- Cash and cash equivalents makes up 18.3% of JetBlue total assets
- Stockholders equity in JetBlue: $4.094 billion
- Stockholders equity per share in JetBlue: $15.07
- JetBlue is trading at 0.68 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 3.7. Read more about the S&P500 here.
A few details regarding JetBlue is shown below
Description 2Q 2020 2Q2019 Percentage change year over year
Average fare: $ 276.35 $184.24 50.0
Available seat miles (ASM) 2,413 16,029 -84.9
Yield per passenger mile (cents) 20.86 14.74 41.5
Passenger revenue per ASM (cents) 7.06 12.68 -44.3
Revenue per ASM (cents) 8.91 13.14 -32.6
Operating expense per ASM (cents) 25.9 11.58 123.7
JetBlue's management commentary on their 2nd quarter 2020 earnings report
NEW YORK--(BUSINESS WIRE)-- JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the second quarter 2020:
Our Recovery Plan and Actions Taken to Position JetBlue for Future Success
“For the past 20 years we have succeeded against the odds, and we firmly believe that we are laying the foundation and repositioning JetBlue to come out of this historic crisis as a stronger, global player in the years to come,” said Robin Hayes, JetBlue’s Chief Executive Officer. “In the past two months, we made progress in reducing our cash burn, and have been quick to resize our operations to the very dynamic demand environment. While demand has improved materially from the lows we saw in April, bookings remain choppy, and we remain focused on addressing changing trends as we progress through the summer.
As we move into recovery, we have laid out a three-step framework to set JetBlue up for success and emerge stronger. The first is to reduce our cash burn. The second step is to rebuild our margins. The third and last step is to repair our balance sheet. We have been nimble and managed the short term with a sense of urgency, to reduce our cash burn and build liquidity. We are confident that our actions to protect the health and safety of our Customers and Crewmembers, our network changes, and focus on costs will help us rebuild our margins faster.”
Balance Sheet and Liquidity
Fuel Expense and Hedging
The realized fuel price in the quarter was $0.96 per gallon, a 55% decline versus second quarter 2019 realized fuel price of $2.16.
JetBlue has entered into forward fuel derivative contracts to hedge its fuel consumption for the third and fourth quarter of 2020. Based on the forward curve as of July 17th, JetBlue expects an average all-in price per gallon of fuel of $1.24 in the third quarter of 2020.
- Reported GAAP loss per share of ($1.18) in the second quarter of 2020 compared to a diluted earnings per share of $0.59 in the second quarter of 2019. Adjusted loss per share was ($2.02)(1) in the second quarter of 2020 versus adjusted diluted earnings per share of $0.60(1) in the second 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 ($450) million in the second quarter of 2020, compared to a pre-tax income of $236 million in the second quarter of 2019. Excluding one-time items, adjusted pre-tax loss of ($754) million(1) in the second quarter of 2020 versus adjusted pre-tax income of $238 million(1) in the second quarter of 2019.
Our Recovery Plan and Actions Taken to Position JetBlue for Future Success
“For the past 20 years we have succeeded against the odds, and we firmly believe that we are laying the foundation and repositioning JetBlue to come out of this historic crisis as a stronger, global player in the years to come,” said Robin Hayes, JetBlue’s Chief Executive Officer. “In the past two months, we made progress in reducing our cash burn, and have been quick to resize our operations to the very dynamic demand environment. While demand has improved materially from the lows we saw in April, bookings remain choppy, and we remain focused on addressing changing trends as we progress through the summer.
As we move into recovery, we have laid out a three-step framework to set JetBlue up for success and emerge stronger. The first is to reduce our cash burn. The second step is to rebuild our margins. The third and last step is to repair our balance sheet. We have been nimble and managed the short term with a sense of urgency, to reduce our cash burn and build liquidity. We are confident that our actions to protect the health and safety of our Customers and Crewmembers, our network changes, and focus on costs will help us rebuild our margins faster.”
Balance Sheet and Liquidity
- JetBlue ended the second quarter with approximately $2.9 billion in unrestricted cash, cash equivalents, and short-term investments, or 36% of 2019 revenue. Including the CARES Act PSP proceeds, our liquidity was $3.4 billion at the end of second quarter 2020, or 42% of 2019 revenue.
- JetBlue repaid $78 million in regularly scheduled debt and finance lease obligations during the second quarter of 2020.
- JetBlue has taken the following measures in the second quarter to manage liquidity:
- Raised $750 million under a secured term loan.
- Executed approximately $120 million under sale-leaseback transactions, and entered a binding agreement for three additional sale-leaseback transactions for upcoming deliveries. In addition, we have entered into two other binding sale-leaseback agreements for aircraft already existing in our fleet.
- Achieved significant variable and fixed cost savings through aggressive capacity reductions and adjusted work schedules.
- Redeployed assets to capture short-term, tactical cash generation opportunities.
- Resulting from the actions taken, JetBlue’s average daily cash burn in May was $9 million vs its prior expectations for just below $10 million. Average daily cash burn in the second quarter was $9.5 million vs its prior expectations for $11 million, and the daily cash burn at the end of June was just under $8 million. JetBlue continues to expect average daily cash burn in the third quarter for a range of $7 to $9 million.
Fuel Expense and Hedging
The realized fuel price in the quarter was $0.96 per gallon, a 55% decline versus second quarter 2019 realized fuel price of $2.16.
JetBlue has entered into forward fuel derivative contracts to hedge its fuel consumption for the third and fourth quarter of 2020. Based on the forward curve as of July 17th, JetBlue expects an average all-in price per gallon of fuel of $1.24 in the third quarter of 2020.
Action Plan, Revenue and Capacity
“We are laser-focused on managing the current environment of low demand,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer. “In the short term, we have added tactical point-to-point flights, responding to unserved demand in leisure and VFR markets and supporting our cash generation efforts. In the long term, our actions help us solidify our network strategy to improve our position in our Focus Cities. We are taking advantage of unique opportunities presented by the pandemic to allow us to rebuild our margins when demand returns.
Volumes have increased since demand bottomed out in April, and during the second quarter our revenue broadly tracked to our L-shaped recovery forecast. We expect demand trends will continue to be volatile and recovery will not be linear. Given the choppiness in demand, we will continue to take a conservative approach in planning capacity and forecasting revenue.
As we see booking trends beginning to improve after bottoming out in April, we believe capacity will lead the way to demand and revenue recovery. That said, our guiding criteria is cash generation, and we will continue to be nimble in reacting to changes in demand trends.”
Cost Performance and Outlook
“We continue to manage through this fluid environment with a near-term focus on preserving liquidity. Just as importantly, we are positioning JetBlue to thrive as we emerge from the pandemic,” said Steve Priest, JetBlue’s Chief Financial Officer. “Last month we raised approximately $750 million with a new term loan backed by JFK, LaGuardia and Washington Reagan slots, as well as by our JetBlue brand. We also entered into sale-leaseback transactions that raised nearly $120 million during the quarter. Our liquidity equated to $3.4 billion at the close of June, or 42% of our 2019 revenue.
Our daily cash burn improved every month since April, to under $8 million at the end of June. The improvement during the quarter came mainly from our efforts to manage capacity, reduce our cost base and manage payment terms. Improvements in revenue trends during the quarter also contributed to our progress in cash burn. Looking into the third quarter, we continue to estimate our daily cash burn between $7 and $9 million, mainly driven by a continuation of our work to reduce our cost base, and capacity actions to respond to changes in demand. Where we fall within the range will depend on the revenue environment during the third quarter.”
“We are laser-focused on managing the current environment of low demand,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer. “In the short term, we have added tactical point-to-point flights, responding to unserved demand in leisure and VFR markets and supporting our cash generation efforts. In the long term, our actions help us solidify our network strategy to improve our position in our Focus Cities. We are taking advantage of unique opportunities presented by the pandemic to allow us to rebuild our margins when demand returns.
Volumes have increased since demand bottomed out in April, and during the second quarter our revenue broadly tracked to our L-shaped recovery forecast. We expect demand trends will continue to be volatile and recovery will not be linear. Given the choppiness in demand, we will continue to take a conservative approach in planning capacity and forecasting revenue.
As we see booking trends beginning to improve after bottoming out in April, we believe capacity will lead the way to demand and revenue recovery. That said, our guiding criteria is cash generation, and we will continue to be nimble in reacting to changes in demand trends.”
Cost Performance and Outlook
“We continue to manage through this fluid environment with a near-term focus on preserving liquidity. Just as importantly, we are positioning JetBlue to thrive as we emerge from the pandemic,” said Steve Priest, JetBlue’s Chief Financial Officer. “Last month we raised approximately $750 million with a new term loan backed by JFK, LaGuardia and Washington Reagan slots, as well as by our JetBlue brand. We also entered into sale-leaseback transactions that raised nearly $120 million during the quarter. Our liquidity equated to $3.4 billion at the close of June, or 42% of our 2019 revenue.
Our daily cash burn improved every month since April, to under $8 million at the end of June. The improvement during the quarter came mainly from our efforts to manage capacity, reduce our cost base and manage payment terms. Improvements in revenue trends during the quarter also contributed to our progress in cash burn. Looking into the third quarter, we continue to estimate our daily cash burn between $7 and $9 million, mainly driven by a continuation of our work to reduce our cost base, and capacity actions to respond to changes in demand. Where we fall within the range will depend on the revenue environment during the third quarter.”
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 $22.98 a stock and its currently trading at $10.31. That's a significant loss of -55.1% 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.
JetBlue (JBLU) vs Southwest (LUV) vs American (AAL) vs United (UAL) stock over last 3 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 four airliners, while they all made significant losses, Southwest (LUV) was the best performer while American (AAL) the worst performer. JetBlue came in second from last in this comparison with their stock declining a significant 52.42% over the last 3 years
- Southwest Airlines (LUV): -40.99%
- United Airlines (UAL): -49.84%
- JetBlue (JBLU): -52.42%
- American Airlines (AAL): -75.89%
So looking at the performance of these four airliners, while they all made significant losses, Southwest (LUV) was the best performer while American (AAL) the worst performer. JetBlue came in second from last in this comparison with their stock declining a significant 52.42% over the last 3 years
Recent coverage of JetBlue
The extract below shows recent coverage of JetBlue as obtained from Finance.yahoo.com
JetBlue Airways (JBLU) came out with a quarterly loss of $2.02 per share versus the Zacks Consensus Estimate of a loss of $1.86. This compares to earnings of $0.60 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -8.60%. A quarter ago, it was expected that this airline would post a loss of $0.41 per share when it actually produced a loss of $0.42, delivering a surprise of -2.44%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times. JetBlue, which belongs to the Zacks Transportation - Airline industry, posted revenues of $215 million for the quarter ended June 2020, missing the Zacks Consensus Estimate by 2.32%. This compares to year-ago revenues of $2.11 billion. The company has topped consensus revenue estimates two times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. JetBlue shares have lost about 45.4% since the beginning of the year versus the S&P 500's gain of 0.3%.
What's Next for JetBlue?
While JetBlue has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Read the full article here
JetBlue Airways (JBLU) came out with a quarterly loss of $2.02 per share versus the Zacks Consensus Estimate of a loss of $1.86. This compares to earnings of $0.60 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -8.60%. A quarter ago, it was expected that this airline would post a loss of $0.41 per share when it actually produced a loss of $0.42, delivering a surprise of -2.44%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times. JetBlue, which belongs to the Zacks Transportation - Airline industry, posted revenues of $215 million for the quarter ended June 2020, missing the Zacks Consensus Estimate by 2.32%. This compares to year-ago revenues of $2.11 billion. The company has topped consensus revenue estimates two times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. JetBlue shares have lost about 45.4% since the beginning of the year versus the S&P 500's gain of 0.3%.
What's Next for JetBlue?
While JetBlue has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
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 $15.07 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 $15.06 A good entry price into JetBlue stock would therefore be at $13.51 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 $15.06 A good entry price into JetBlue stock would therefore be at $13.51 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 3rd quarter 2020 earnings release in late October 2020