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Category: Jetblue Airways (JBLU)
Date: 1 February 2021 Stock Price of JetBlue (JBLU) : $14.34 We take a look at the 4th 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 all airline groups hard. For the 4th quarter the group reported revenues of $661 million and a net loss of -$381 million.
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2020 was a year like no other, as the COVID-19 pandemic challenged our industry in ways we have never seen before. The very foundation of our business model - our culture, our passion for customer service, and our focus on safety – continue to guide us as we march towards recovery - 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
Jetblue Aeroplane
Overview of JetBlue 4th 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 4Q 2020 4Q2019 Percentage change year over year
Average fare: $ 180.54 $185.96 -2.9
Available seat miles (ASM) 8,480 16,079 -47.3
Yield per passenger mile (cents) 13.63 14.79 -7.8
Passenger revenue per ASM (cents) 7.15 12.12 -41
Revenue per ASM (cents) 7.80 12.63 -38.3
Operating expense per ASM (cents) 13.16 11.22 17.2
- Revenues: $661 million (down from $2.031 billion for the same quarter of the previous year)
- Revenue decreased by -67.4% over the last 12 months
- Operating expenses: $1.12 billion (down from $1.804 billion for the same quarter of the previous year)
- Operating expenses decreased by -38.2% over the last 12 months
- Net loss: -$381 million (down from a profit of $161 million for the same quarter of the previous year)
- Diluted loss per share: -$1.34 (down from $0.56 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: 284 million (down from 287 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.92 billion
- Cash and cash equivalents per share: $6.76
- Cash and cash equivalents makes up 47.1% of JetBlue market capital
- Cash and cash equivalents makes up 14.3% of JetBlue total assets
- Stockholders equity in JetBlue: $3.943 billion
- Stockholders equity per share in JetBlue: $13.88
- JetBlue is trading at 1.03 times its stockholders equity per share which is outside the expected range of between 2 and 6 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 4.2
A few details regarding JetBlue is shown below
Description 4Q 2020 4Q2019 Percentage change year over year
Average fare: $ 180.54 $185.96 -2.9
Available seat miles (ASM) 8,480 16,079 -47.3
Yield per passenger mile (cents) 13.63 14.79 -7.8
Passenger revenue per ASM (cents) 7.15 12.12 -41
Revenue per ASM (cents) 7.80 12.63 -38.3
Operating expense per ASM (cents) 13.16 11.22 17.2
JetBlue's management commentary on their 4th quarter 2020 earnings report
NEW YORK--(BUSINESS WIRE)-- JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the fourth quarter 2020
Fuel Expense and Hedging
The realized fuel price in the fourth quarter 2020 was $1.31 per gallon, a 37% decline versus fourth quarter 2019 realized fuel price of $2.07.
As of January 28th 2021, JetBlue has not entered into forward fuel derivative contracts to hedge its fuel consumption for the first quarter of 2021. Based on the forward curve as of January 15th, JetBlue expects an average all-in price per gallon of fuel of $1.61 in the first quarter of 2021.
Our Recovery Plan and Actions Taken to Position JetBlue for Future Success
“2020 was a year like no other, as the COVID-19 pandemic challenged our industry in ways we have never seen before. The very foundation of our business model - our culture, our passion for customer service, and our focus on safety – continue to guide us as we march towards recovery,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“Despite the financial results, I'm proud of what our crewmembers have accomplished in this extraordinary year. I could not be more confident in our future. Our team not only managed through the ongoing demand challenges, but made important progress on strategic initiatives – including revenue, capacity and cost actions.
As we moved through 2020, we meaningfully reduced our cash burn, and are starting to shift our focus to rebuilding our margins. We remain cautiously optimistic that demand trends will improve later this year. More importantly, this crisis has made us a more agile, creative and resilient airline, and we believe our initiatives will allow us to emerge with structurally better margins.”
Action Plan, Revenue and Capacity
“Delivering consistently on our Safety from the Ground Up Program remains one of the top reasons why customers are returning to air travel and choosing JetBlue. Our focus remains on cleanliness, reduced touchpoints and air quality, and we are also prioritizing efforts to educate our customers about the changing regulatory requirements associated with air travel, whether that is testing, quarantine, or documentation requirements. We know many customers want to travel, and we are trying to help them more easily navigate the changing requirements,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.
“Despite this progress in the fourth quarter, our geographic challenges persist, with increasing case counts and continued quarantine measures, particularly in the northeast and California. For the first quarter of 2021, our planning assumption for revenue is a decline of between (65) and (70)% year over two. We saw increased demand for Martin Luther King weekend, and are seeing a similar pattern for Presidents’ Day weekend, but we don’t anticipate traffic to reach the levels of late December.”
Fuel Expense and Hedging
The realized fuel price in the fourth quarter 2020 was $1.31 per gallon, a 37% decline versus fourth quarter 2019 realized fuel price of $2.07.
As of January 28th 2021, JetBlue has not entered into forward fuel derivative contracts to hedge its fuel consumption for the first quarter of 2021. Based on the forward curve as of January 15th, JetBlue expects an average all-in price per gallon of fuel of $1.61 in the first quarter of 2021.
Our Recovery Plan and Actions Taken to Position JetBlue for Future Success
“2020 was a year like no other, as the COVID-19 pandemic challenged our industry in ways we have never seen before. The very foundation of our business model - our culture, our passion for customer service, and our focus on safety – continue to guide us as we march towards recovery,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“Despite the financial results, I'm proud of what our crewmembers have accomplished in this extraordinary year. I could not be more confident in our future. Our team not only managed through the ongoing demand challenges, but made important progress on strategic initiatives – including revenue, capacity and cost actions.
As we moved through 2020, we meaningfully reduced our cash burn, and are starting to shift our focus to rebuilding our margins. We remain cautiously optimistic that demand trends will improve later this year. More importantly, this crisis has made us a more agile, creative and resilient airline, and we believe our initiatives will allow us to emerge with structurally better margins.”
Action Plan, Revenue and Capacity
“Delivering consistently on our Safety from the Ground Up Program remains one of the top reasons why customers are returning to air travel and choosing JetBlue. Our focus remains on cleanliness, reduced touchpoints and air quality, and we are also prioritizing efforts to educate our customers about the changing regulatory requirements associated with air travel, whether that is testing, quarantine, or documentation requirements. We know many customers want to travel, and we are trying to help them more easily navigate the changing requirements,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.
“Despite this progress in the fourth quarter, our geographic challenges persist, with increasing case counts and continued quarantine measures, particularly in the northeast and California. For the first quarter of 2021, our planning assumption for revenue is a decline of between (65) and (70)% year over two. We saw increased demand for Martin Luther King weekend, and are seeing a similar pattern for Presidents’ Day weekend, but we don’t anticipate traffic to reach the levels of late December.”
Financial Performance and Outlook
“Our average daily cash burn for the fourth quarter was $6.7 million, towards the lower end of the $6 to $8 million range we anticipated in early December. This was the result of variable cost savings achieved through a balanced approach to capacity, and our actions to minimize fixed costs across our business,” said Steve Priest, JetBlue’s Chief Financial Officer.
“We estimate our EBITDA in the first quarter will range between negative $525 and $625 million, reflecting similar revenue trends to the fourth quarter, but also manifesting recent cost pressure from rents and landing fees, as well as fuel prices.
We continue to take an aggressive approach to improve our cost structure and help rebuild our margins. Our 2021 plan reduces our total operating cost by over $1.2 billion, compared to 2019. We believe that executing our plan will put us on a path to emerge from the crisis, with better CASM ex-Fuel in 2022 than in 2019.”
“Our average daily cash burn for the fourth quarter was $6.7 million, towards the lower end of the $6 to $8 million range we anticipated in early December. This was the result of variable cost savings achieved through a balanced approach to capacity, and our actions to minimize fixed costs across our business,” said Steve Priest, JetBlue’s Chief Financial Officer.
“We estimate our EBITDA in the first quarter will range between negative $525 and $625 million, reflecting similar revenue trends to the fourth quarter, but also manifesting recent cost pressure from rents and landing fees, as well as fuel prices.
We continue to take an aggressive approach to improve our cost structure and help rebuild our margins. Our 2021 plan reduces our total operating cost by over $1.2 billion, compared to 2019. We believe that executing our plan will put us on a path to emerge from the crisis, with better CASM ex-Fuel in 2022 than in 2019.”
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 -33.1% 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 Airways (JBLU) stock price chart over the last 5 years
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 of Southwest has been the best performer with it managing a very small gain of 3% while JetBlue has been the biggest loser with it losing -38.2% of its value over the last 5 years.
- Southwest Airlines (LUV): 3.2%
- Delta Airlines (DAL): -22.85%
- JetBlue (JBLU): -38.2%
So looking at the performance of these three airliners, the stock of Southwest has been the best performer with it managing a very small gain of 3% while JetBlue has been the biggest loser with it losing -38.2% of its value over the last 5 years.
JetBlue (JBLU) vs Southwest (LUV) vs Delta (DAL) stock over last 5 years
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 $16.40 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 $16.40. A good entry price into JetBlue (JBLU) stock would therefore be at $4.76 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 $16.40. A good entry price into JetBlue (JBLU) stock would therefore be at $4.76 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 2021 earnings release in late April 2021