Low-cost carrier JetBlue Airways Corporation 's JBLU second-quarter 2016 earnings (excluding special items) of 53 cents per share beat the Zacks Consensus Estimate of 49 cents. Earnings improved substantially from the year-ago figure, aided by low fuel costs.
Total operating revenue climbed 2% year over year to $1,643 million, beating the Zacks Consensus Estimate of $1,635 million. The strong earnings report pleased investors which drove the stock in early trading.
The top line was benefitted by a 35.2% increase in other revenues. Passenger revenues in the quarter under review decreased 0.6% year over year to $1,487 million.
Capacity, measured in available seat miles, expanded 11.1% year over year while traffic measured in revenue passenger miles grew 10.3% in the second quarter. Load factor (percentage of seats filled by passengers) edged down 60 basis points (bps) year over year to 85% in the reported quarter as capacity expansion outpaced traffic growth.
Yield per passenger mile fell 9.9% year over year to 12.87 cents in the reported quarter. Passenger revenue per available seat mile (PRASM) plummeted 10.5% on an annual basis to 10.94 cents while operating revenue per available seat mile (RASM) decreased 8.2% to 12.09 cents.
Operating Income and Expenses
In the second quarter of 2016, total operating expenses were flat year over year on a reported basis. Average fuel cost per gallon, inclusive of fuel taxes, declined 32.8% to $1.43 per gallon. JetBlue's operating expense per available seat mile (CASM) decreased 9.9% in the reported quarter to 9.78 cents. Excluding fuel and profit sharing, the metric decreased 1% to 7.48 cents.
JETBLUE AIRWAYS Price, Consensus and EPS Surprise
JetBlue ended the second quarter of 2016 with cash and cash equivalents of $935 million compared with $318 million at the end of 2015. Total debt, at the end of same quarter, was $1,746 million compared with $1,827 million at the end of 2015. The debt to capitalization ratio at the end of the quarter was 32.4% compared with 36.3% at the end of 2015.
For the third quarter of 2016, the carrier expects capacity to increase in the band of 5.5% to 7.5%. For full-year 2016, the metric is still expected to increase in the range of 8% to 9.5%. Consolidated operating cost per available seat mile, excluding fuel and profit sharing, is expected to grow in the band of 1% to 3% in the third quarter of 2016. For full-year 2016, the metric is still expected to remain flat or grow up to 1.5%.
The low-cost carrier announced plans to expand its Mint experience by amending its purchase agreement with Airbus. To modernize its fleet, JetBlue aims to introduce 30 additional A321 aircraft over a period of seven years, per the agreement. The move is aimed to strengthen its presence in transcontinental markets. Airbus is scheduled to deliver 15 incremental A321ceos to JetBlue from 2017. Starting 2020, the low-cost carrier's fleet should be bolstered by the addition of 15 A321neos.
Zacks Rank & Stocks to Consider
JetBlue currently carries a Zacks Rank #5 (Strong Sell). Investors interested in the broader transportation space may consider Cathay Pacific Airways Limited CPCAY and Air Lease Corp AL with a Zack Rank #1 (Strong Buy) and ANA Holdings Inc. ALNPY with a Zacks Rank #2 (Buy).
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