|
Related Topics
|
Category: Jetblue (JBLU) vs Southwest Airlines (LUV)
Date: 21 July 2020 Stock price of JetBlue: $10.35 Stock price of Southwest: $32.98 We compare the stock of JetBlue Airlines (JBLU) to that of Southwest Airlines (LUV). Which stock has performed better over the last couple of years and which one is set to provide superior returns to investors in future? While it has been a torrid time for airline stocks the market will recover and the question is who is best placed to take advantage of it
|
So JetBlue's stock has declined by a lot more than Southwest Airlines over the last 3 years. So is there any fundamental reason why the stock of JBLU has declined more than Southwest Airlines? Or does the fact that JetBlue declined more than that of Southwest Airlines provide a good opportunity to buy JetBlue at a discounted price compared to Southwest. "
More About JetBlue (JBL)
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 JetbBlue latest earnings report
Overview of JetbBlue latest earnings report
- 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
- Cash and cash equivalents per share: $6.06
- 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.
- Stockholders equity per share in JetBlue: $15.76
More About Southwest Airlines (LUV)
In its 49th year of service, Dallas-based Southwest Airlines Co. (NYSE: LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 60,000 Employees to a Customer base topping 130 million passengers annually. Southwest became the nation’s largest domestic air carrier in 2003 and maintains that ranking based on the U.S. Department of Transportation’s most recent reporting of domestic originating passengers boarded. In peak travel seasons, Southwest operates more than 4,000 weekday departures among a network of 101 destinations in the United States and 10 additional countries.
Southwest coined Transfarency® to describe its purposed philosophy of treating Customers honestly and fairly, and low fares actually staying low. Southwest is the only major U.S. airline to offer bags fly free® to everyone (first and second checked pieces of luggage, size and weight limits apply, some carriers offer free checked bags on select routes or in qualified circumstances), and there are no change fees, though fare differences might apply.
Southwest is committed to returning value to its Shareholders. Since 2010, Southwest has returned more than $11.7 billion to Shareholders through share repurchases and dividends, through September 30, 2019. In the first nine months of 2019, Southwest returned $1.8 billion to Shareholders through the repurchase of $1.45 billion in common stock and the payment of $372 million in dividends.
Overview of Southwest Airlines latest earnings report
Southwest coined Transfarency® to describe its purposed philosophy of treating Customers honestly and fairly, and low fares actually staying low. Southwest is the only major U.S. airline to offer bags fly free® to everyone (first and second checked pieces of luggage, size and weight limits apply, some carriers offer free checked bags on select routes or in qualified circumstances), and there are no change fees, though fare differences might apply.
Southwest is committed to returning value to its Shareholders. Since 2010, Southwest has returned more than $11.7 billion to Shareholders through share repurchases and dividends, through September 30, 2019. In the first nine months of 2019, Southwest returned $1.8 billion to Shareholders through the repurchase of $1.45 billion in common stock and the payment of $372 million in dividends.
Overview of Southwest Airlines latest earnings report
- Revenues: $4.234 billion (down from $5.149 billion for the same period of the previous year)
- Revenues decreased by-17.8% over the last 12 months
- Operating expenses: $4.344 billion (down from $4.664 billion for the same period of the previous year)
- Operating expenses decreased by -6.5% over the last 12 months
- Net loss: -$94 million (down from $387 million from for the same period of the previous year)
- Diluted loss per share: -$0.18 (down from $0.70 for the same period of the previous year)
- Diluted weighted-average shares outstanding: 515 million (down from 552 million for the same period of the previous year)
- Cash and cash equivalents: $3.940 billion
- Cash and cash equivalents per share: $7.65
- Cash and cash equivalents makes up 21.3% of Southwest Airlines market capital
- Cash and cash equivalents makes up 14.7% of Southwest Airlines total assets
- Cash and cash equivalents per share: $7.65
- Flight equipment: $21.580 billion
- Stockholders equity in Southwest Airlines: $9.075 billion
- Stockholders equity per Southwest Airlines share: $17.62
- Southwest Airlines is trading at 2.03 times its stockholders equity per share which is just within the expected range of between 2 and 4 that most firms tend to trade at
- Stockholders equity per Southwest Airlines share: $17.62
- The average price to book value of firms in the S&P 500 is 3.7
- Cash used in operations: -$377 million
- Cash generated from operations per share: -$0.73
- So Southwest Airlines burned through $377 million
JetBlue (JBLU) stock vs Southwest (LUV) stock performance over the last 3 years
The image below shows the stock price performance of JetBlue (JBLU) and Southwest Airlines (LUV) over the last 3 years. From the image one can clearly see the impact of the Covid-19 pandemic on the stock price of these two airlines, with both of them suffering significant declines since the start of the year.
Stock price return of JetBlue (JBLU) and Southwest Airlines (LUV) over the last 3 years:
So JetBlue's stock has declined by a lot more than Southwest Airlines over the last 3 years. So is there any fundamental reason why the stock of JBLU has declined more than Southwest Airlines? Or does the fact that JetBlue declined more than that of Southwest Airlines provide a good opportunity to buy JetBlue at a discounted price compared to Southwest.
- Southwest Airlines (LUV): -40.44%
- JetBlue (JBLU): - 52.44%
So JetBlue's stock has declined by a lot more than Southwest Airlines over the last 3 years. So is there any fundamental reason why the stock of JBLU has declined more than Southwest Airlines? Or does the fact that JetBlue declined more than that of Southwest Airlines provide a good opportunity to buy JetBlue at a discounted price compared to Southwest.
Comparison of the fundamentals of JetBlue (JBLU) and Southwest Airlines (LUV)
So having looked at the stock price performance of these two airlines, lets focus on the fundamentals (earnings reports) of these two in order to determine which of the two offers more value from a fundamental analysis point of view.
Price to Stockholders equity per share
Most firms tend to trade at a price to stockholders equity per share ratio of between 2 and 4 times. Anything less than 1 indicates that if a firm was to be liquidated right now an investor would get out more than the current stock price. Thus for JetBlue if they were to liquidate now investors in JetBlue will get over $15 a stock yet the stock is trading at $10.35
Cash as percentage of market capital
This metric shows how much of a firms stock price is made up by cash on the balance sheet. So if you buy LUV stock now, 23.2% of the price paid for the stock is basically cash on their balance sheet. In JetBlue's case buying the stock at $10.35 , of the $10.35 paid $6.06 is lying in cash on the balance sheet.
Cash as percentage of total assets
This is perhaps the best measure of a company's overall cash position. The percentage cash makes up of their total assets. And in this metric Southwest Airlines cash makes up a greater share of their total assets than that of JetBlue, and we believe this is the main reason why the stock of Southwest (LUV) has outperformed that of JetBlue (JBLU). A stronger cash position means they are less likely to take on debt or issue stock to raise capital to get through difficult times.
All things considered in the battle of these two airlines we rate the stock of Southwest Airlines (LUV) as the WINNER
Price to Stockholders equity per share
- Southwest Airlines (LUV):1.87
- JetBlue (JBLU): 0.66
Most firms tend to trade at a price to stockholders equity per share ratio of between 2 and 4 times. Anything less than 1 indicates that if a firm was to be liquidated right now an investor would get out more than the current stock price. Thus for JetBlue if they were to liquidate now investors in JetBlue will get over $15 a stock yet the stock is trading at $10.35
Cash as percentage of market capital
- Southwest Airlines (LUV): 23.2%
- JetBlue (JBLU): 63.8%
This metric shows how much of a firms stock price is made up by cash on the balance sheet. So if you buy LUV stock now, 23.2% of the price paid for the stock is basically cash on their balance sheet. In JetBlue's case buying the stock at $10.35 , of the $10.35 paid $6.06 is lying in cash on the balance sheet.
Cash as percentage of total assets
- Southwest Airlines (LUV): 14.7%
- JetBlue (JBLU): 13.6%
This is perhaps the best measure of a company's overall cash position. The percentage cash makes up of their total assets. And in this metric Southwest Airlines cash makes up a greater share of their total assets than that of JetBlue, and we believe this is the main reason why the stock of Southwest (LUV) has outperformed that of JetBlue (JBLU). A stronger cash position means they are less likely to take on debt or issue stock to raise capital to get through difficult times.
All things considered in the battle of these two airlines we rate the stock of Southwest Airlines (LUV) as the WINNER
Related Topics