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Category: Stock Market and Jetblue Airways (JBLU)
Date: 27 October 2020 Stock Price of JetBlue: $11.95 We take a look at the 3rd 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 -76.4% compared to the same quarter of the previous year and recording a loss for the quarter of -$393 million.
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Our average daily cash burn for the third quarter was $6.1 million dollars, ahead of the $7 to $9 million dollar range we anticipated 3 months ago. This was the result of a modest improvement in demand, beginning in August, variable cost savings achieved through a balanced approach to capacity, and the many actions we took to minimize fixed costs across our business. For the fourth quarter, we estimate our daily cash burn to be between $4 and $6 million dollars - 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 3rd 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 3Q 2020 3Q2019 Percentage change year over year
Average fare: $ 206.73 $181.26 14.1
Available seat miles (ASM) 6.905 16,286 -57.6
Yield per passenger mile (cents) 15.10 14.39 4.9
Passenger revenue per ASM (cents) 6.44 12.30 -47.7
Revenue per ASM (cents) 7.12 12.80 -44.4
Operating expense per ASM (cents) 14.64 11.29 29.3
- Revenues: $492 million (down from $2.086 billion for the same quarter of the previous year)
- Revenue decreased by -76.4% over the last 12 months
- Operating expenses: $1 billion (down from $1.839 billion for the same quarter of the previous year)
- Operating expenses decreased by -45.2% over the last 12 months
- Net loss: -$393 million (down from a profit of $187 million for the same quarter of the previous year)
- Diluted loss per share: -$1.44 (down from $0.63 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: 272.4 million (down from 295.9 million for the same quarter of the previous year)
- Cash and cash equivalents: $2.453 billion
- Cash and cash equivalents per share: $9.00
- Cash and cash equivalents makes up 75.3% of JetBlue market capital
- Cash and cash equivalents makes up 18.2% of JetBlue total assets
- Stockholders equity in JetBlue: $3.717 billion
- Stockholders equity per share in JetBlue: $13.64
- JetBlue is trading at 0.87 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 3Q 2020 3Q2019 Percentage change year over year
Average fare: $ 206.73 $181.26 14.1
Available seat miles (ASM) 6.905 16,286 -57.6
Yield per passenger mile (cents) 15.10 14.39 4.9
Passenger revenue per ASM (cents) 6.44 12.30 -47.7
Revenue per ASM (cents) 7.12 12.80 -44.4
Operating expense per ASM (cents) 14.64 11.29 29.3
JetBlue's management commentary on their 3rd quarter 2020 earnings report
NEW YORK--(BUSINESS WIRE)-- JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the third quarter 2020:
“Day in and day out, our crewmembers continue to deliver on our mission - to Inspire Humanity. Their dedication and passion for delivering outstanding service has been remarkable, especially as we work to restore our customers’ confidence in air travel,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“Our efforts to raise liquidity, reshape our network, and reduce costs, are bearing fruit, and have helped us navigate the immediate crisis. We are confident that our low-cost, low fare leisure model, with the best crewmembers in the industry, and a brand that customers trust, will all help JetBlue emerge stronger from this crisis.
In the near term, we continue to manage our daily flying and take tactical actions to ensure we generate cash as demand recovers. We are also executing revenue and cost initiatives, redeploying our aircraft to new, cash accretive markets, and setting JetBlue up for a strong rebound. Naturally, we aim to be free cash flow positive, with the goal of repairing our balance sheet over the coming years.”
Action Plan, Revenue and Capacity
“In the third quarter, our revenue declined 76% year over year, a welcome improvement compared to our initial expectation. We saw a modest, sequential improvement in August and September demand as new case counts decreased, and quarantine restrictions in some states were eased. Our Northeast geography continues to be disproportionately impacted, though we believe it will undoubtedly rebound as it always has with past challenges,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.
“Our planning assumption for the fourth quarter is a revenue decline of approximately 65% year over year. Although there still quite a lot of uncertainty about the evolution of the coronavirus, we are starting to see the booking curve extend slightly into the upcoming Thanksgiving and December holiday travel period, and we are encouraged by Customers responding positively to our promotional activity including an early holiday sale in late September. For the fourth quarter, our current planning assumption is for capacity to decline approximately 45% year over year, given our current expectations for improved bookings.”
- Reported GAAP loss per share of ($1.44) in the third quarter of 2020 compared to a diluted earnings per share of $0.63 in the third quarter of 2019. Adjusted loss per share was ($1.75) in the third quarter of 2020 versus adjusted diluted earnings per share of $0.59 in the third 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 ($578) million in the third quarter of 2020, compared to a pre-tax income of $254 million in the third quarter of 2019. Excluding one-time items, adjusted pre-tax loss of ($690) million in the third quarter of 2020 versus adjusted pre-tax income of $239 million in the third quarter of 2019.
“Day in and day out, our crewmembers continue to deliver on our mission - to Inspire Humanity. Their dedication and passion for delivering outstanding service has been remarkable, especially as we work to restore our customers’ confidence in air travel,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“Our efforts to raise liquidity, reshape our network, and reduce costs, are bearing fruit, and have helped us navigate the immediate crisis. We are confident that our low-cost, low fare leisure model, with the best crewmembers in the industry, and a brand that customers trust, will all help JetBlue emerge stronger from this crisis.
In the near term, we continue to manage our daily flying and take tactical actions to ensure we generate cash as demand recovers. We are also executing revenue and cost initiatives, redeploying our aircraft to new, cash accretive markets, and setting JetBlue up for a strong rebound. Naturally, we aim to be free cash flow positive, with the goal of repairing our balance sheet over the coming years.”
Action Plan, Revenue and Capacity
“In the third quarter, our revenue declined 76% year over year, a welcome improvement compared to our initial expectation. We saw a modest, sequential improvement in August and September demand as new case counts decreased, and quarantine restrictions in some states were eased. Our Northeast geography continues to be disproportionately impacted, though we believe it will undoubtedly rebound as it always has with past challenges,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.
“Our planning assumption for the fourth quarter is a revenue decline of approximately 65% year over year. Although there still quite a lot of uncertainty about the evolution of the coronavirus, we are starting to see the booking curve extend slightly into the upcoming Thanksgiving and December holiday travel period, and we are encouraged by Customers responding positively to our promotional activity including an early holiday sale in late September. For the fourth quarter, our current planning assumption is for capacity to decline approximately 45% year over year, given our current expectations for improved bookings.”
Financial Performance and Outlook
“Our average daily cash burn for the third quarter was $6.1 million dollars, ahead of the $7 to $9 million dollar range we anticipated 3 months ago. This was the result of a modest improvement in demand, beginning in August, variable cost savings achieved through a balanced approach to capacity, and the many actions we took to minimize fixed costs across our business. For the fourth quarter, we estimate our daily cash burn to be between $4 and $6 million dollars,” said Steve Priest, JetBlue’s Chief Financial Officer.
“Earlier this month, we reached a second negotiated agreement with Airbus to defer additional aircraft and associated capital expenditure over the next few years. Since the beginning of the crisis we have reduced aircraft and non-aircraft CAPEX by approximately $2 billion dollars between 2020 and 2022.
At the end of September, our total liquidity was approximately $3.1 billion dollars. During the quarter, we refinanced our $1 billion dollar 364-day term loan and continued our focus on maintaining liquidity. We have approximately $1 billion dollars of traditional unencumbered assets, excluding the value of our TrueBlue loyalty program and our subsidiaries.
As we navigate the current environment with a steady hand, we are shifting our work to rebuilding our margins. We are taking an aggressive approach to improving our cost structure, better aligning our fixed and variable cost base, to temporarily lower revenue and capacity. We believe that our work will return JetBlue to profitability with structurally better margins, and our ultimate intention is to achieve superior pre-tax margins versus the industry.”
“Our average daily cash burn for the third quarter was $6.1 million dollars, ahead of the $7 to $9 million dollar range we anticipated 3 months ago. This was the result of a modest improvement in demand, beginning in August, variable cost savings achieved through a balanced approach to capacity, and the many actions we took to minimize fixed costs across our business. For the fourth quarter, we estimate our daily cash burn to be between $4 and $6 million dollars,” said Steve Priest, JetBlue’s Chief Financial Officer.
“Earlier this month, we reached a second negotiated agreement with Airbus to defer additional aircraft and associated capital expenditure over the next few years. Since the beginning of the crisis we have reduced aircraft and non-aircraft CAPEX by approximately $2 billion dollars between 2020 and 2022.
At the end of September, our total liquidity was approximately $3.1 billion dollars. During the quarter, we refinanced our $1 billion dollar 364-day term loan and continued our focus on maintaining liquidity. We have approximately $1 billion dollars of traditional unencumbered assets, excluding the value of our TrueBlue loyalty program and our subsidiaries.
As we navigate the current environment with a steady hand, we are shifting our work to rebuilding our margins. We are taking an aggressive approach to improving our cost structure, better aligning our fixed and variable cost base, to temporarily lower revenue and capacity. We believe that our work will return JetBlue to profitability with structurally better margins, and our ultimate intention is to achieve superior pre-tax margins versus the industry.”
JetBlue Airways (NASDAQ:JBLU) stock price history over the last 5 years
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 $25 a stock and its currently trading at $11.95. That's a significant loss of -52.2% 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 53.12% over the last 3 years
- Southwest Airlines (LUV): -13.43%
- United Airlines (UAL): -39.23%
- JetBlue (JBLU): -53.12%
- American Airlines (AAL): -72.50%
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 53.12% over the last 3 years
Recent coverage of JetBlue
The extract below shows recent coverage of JetBlue as obtained from Barrons.com
Airline stocks had a rough day on Monday, falling about 5% on signs that Covid cases are reaching new highs. JetBlue Airways’ results—while slightly better than forecasts—aren’t doing much to lift the sector. JetBlue (ticker: JBLU) saw revenue decline 76% to $492 million in the third quarter, beating forecasts for $466 million. The company posted a pretax loss of $697 million, $10 million less than expected, and reported an adjusted loss of $1.75 a share, beating the $1.96 consensus forecast.
Read the full article here
Airline stocks had a rough day on Monday, falling about 5% on signs that Covid cases are reaching new highs. JetBlue Airways’ results—while slightly better than forecasts—aren’t doing much to lift the sector. JetBlue (ticker: JBLU) saw revenue decline 76% to $492 million in the third quarter, beating forecasts for $466 million. The company posted a pretax loss of $697 million, $10 million less than expected, and reported an adjusted loss of $1.75 a share, beating the $1.96 consensus forecast.
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 4th quarter 2020 earnings release in late January 2021