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JetBlue Airways (JBLU) Q4 Earnings: A Beat in the Cards?

JetBlue Airways CorporationJBLU is scheduled to report its fourth-quarter 2016 results on Jan 26, before market opens.

In the third quarter, the carrier had reported lower-than-expected earnings per share. Higher labor costs hurt the bottom line as expenses for salaries, wages and other benefits climbed 8% to $421 million for the low-cost carrier. Operating costs per available seat mile (CASM) - excluding fuel and profit sharing - increased 3.1% for JetBlue to 7.53 cents in the third quarter.

However, the stock has seen brighter times since the third quarter earnings miss, gaining over 16% since that time. The stock outpaced the Zacks categorized Transportation-Airline industry over the last three months. The stock returned 16.44% compared with the industry's gain of 15.8% over the same period.

The optimism regarding the stock ahead of its fourth-quarter earnings release can be gauged by the 11.4% increase in the Zacks Consensus Estimate over the last two months.

We expect JetBlue Airways to top the Zacks Consensus Estimate for the fourth quarter. Our quantitative model too shows that the company is likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP: The Earnings ESP for JetBlue Airways is +2.04% with the Most Accurate estimate exceeding the Zacks Consensus Estimate of 49 cents per share by a penny. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: JetBlue Airways carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered while going into an earnings announcement.

The combination of JetBlue Airways' favorable Zacks Rank and a positive ESP makes us reasonably confident of earnings beat.

JetBlue Airways Corporation Price and EPS Surprise

JetBlue Airways Corporation Price and EPS Surprise | JetBlue Airways Corporation Quote

Factors Likely at Play

In fact, JetBlue has an impressive history with respect to earnings per share. The third-quarter earnings miss was the sole such instance, in the last four quarters. It has surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 6.49%.

We are impressed by JetBlue Airways' efforts to expand its operations. In keeping with the objective, JetBlue made a minority investment in private jet company JetSuite in October. JetSuite, based in California, is one of the largest private jet operators in the US. Its new offering, JetSuiteX has many unique facilities, like no lines, ability to check in just 15 minutes before a flight, free Wi-Fi, checked bags, seat assignments to name a few.

We are also positive on the resumption of commercial flights to Havana by JetBlue in November. The move should boost its top line, as Havana is a favorite tourist spot. In fact, the place is the company's 100th destination. Moreover, the company's efforts to modernize its fleet are also encouraging.

However, the bottom line is likely to be impacted by higher costs due to the recent labor deals inked by the company. Consequently, the carrier expects consolidated unit cost per available seat mile (CASM: mainline ) - excluding fuel and special items - to grow in the band of 4.5 - 6.5% (including negative impact to the tune of 0.5% due to Hurricane Mathew) in the fourth quarter.

Stocks to Consider

Apart from JetBlue Airways , investors who are interested in the airline space may also consider the following stocks. This is because our model shows that these companies too possess the right combination of elements to post an earnings beat this quarter.

American Airlines GroupAAL holds a Zacks Rank #2 and an Earnings ESP of +1.11%. It is scheduled to report fourth-quarter results on Jan 27. The company beat the Zacks Consensus Estimate in three of the last four quarters with an average positive surprise of 20.48%.You can see the complete list of today's Zacks #1 Rank stocks here.

Southwest Airlines Co.LUV carries a Zacks Rank #2 and an Earnings ESP of +1.47%. It is scheduled to report fourth-quarter results on Jan 26. The company beat the Zacks Consensus Estimate in two of the last four quarters with an average positive surprise of 2%.

Spirit AirlinesSAVE has a Zacks Rank #2 and an Earnings ESP of +2.78%. It is scheduled to report fourth-quarter results on Feb 7. The company beat the Zacks Consensus Estimate in each of the last four quarters with an average positive surprise of 4.71%.

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Southwest Airlines Company (LUV): Free Stock Analysis Report

JetBlue Airways Corporation (JBLU): Free Stock Analysis Report

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American Airlines Group, Inc. (AAL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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