Shares of JetBlue Airways Corporation (JBLU) have had a good time on the bourses of late, improving in double-digits over the past 30 days. The encouraging price performance resulted in JBLU outperforming its industry in the said time frame. Moreover, JBLU’s price performance compares favorably with that of fellow U.S. airline operators Southwest Airlines Co. (LUV) and Delta Air Lines DAL in the same time frame.
One-Month Price Comparison
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Currently trading at $6.56, the stock rebounded 91.81% from its 52-week low of $3.42 on Oct. 31, 2023. However, it still reflects a significant 13.5% discount from its 52-week high of $7.58, reached on April 22, 2024.
Given the recent rally, the question that naturally arises is whether JBLU stock can sustain its bullish price performance or should investors book profits now. Before that, let's delve deep to unearth the reasons behind this northward price movement.
JBLU’s Improved Q3 View on Upbeat Summer Travel
JBLU now anticipates its third-quarter revenues to be down 2.5% to up 1% on a year-over-year basis. This marks an improvement from the previous guidance of a decline in the range of 1.5-5.5%. The upside in revenue performance was owing to the improvement in in-month bookings (especially in the Latin region) and continued progress from the previously announced $300 million worth of revenue initiatives. Additionally, revenue uplift from the re-accommodation of customers affected by other airlines' cancelations due to technology outages in July contributed to JBLU’s top line.
Furthermore, JBLU’s improved operational performance during the summer travel season was aided by its strategy of offering better service as a core pillar of its JetForward strategy. JBLU now expects its third-quarter capacity (measured in available seat miles) to decline in the 3-5% range. This marks an improvement over the prior forecast to decline in the 3-6% band.
Declining expenses (owing to the moderating fuel prices since the start of the third quarter) mark another major positive. JetBlue now anticipates third-quarter 2024 average fuel cost per gallon in the range of $2.70-$2.80 (prior view: $2.82 - $2.97). Lower fuel costs should boost the company’s bottom line, as fuel expenses represent a key input cost for any transportation player.
Non-fuel unit costs benefited from cost-cutting efforts and operational reliability, which were partially offset by weather-related disruption costs in August. As a result, the company has lowered its consolidated operating costs per available seat mile’s (excluding fuel and special items) third-quarter guidance. JBLU now anticipates CASM, excluding fuel and special items, to increase 5-7%, down from the prior expectation of a 6-8% increase.
Impressive Valuation Picture for JBLU Stock
From a valuation perspective, JBLU is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of A.
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High Debt Weigh on JetBlue Airways Stock
We are concerned about JBLU’s high debt levels. The low-cost carrier’s long-term debt level has increased to $5 billion at the end of second-quarter 2024 from $3.1 billion at 2022-end.
Long-Term Debt to Capitalization
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Given the headwinds surrounding the stock, the Zacks Consensus Estimate for third-quarter 2024 loss increased to 29 cents from 19 cents over the past 90 days ago.
To Conclude
It is understood that JBLU stock is attractively valued, and upbeat air travel demand is contributing to JBLU’s top line. However, investors should refrain from rushing to buy JBLU now due to the headwinds that it faces.
Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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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.
