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Will High Fuel Costs Dampen JetBlue's (JBLU) Q2 Earnings?

JetBlue Airways CorporationJBLU is scheduled to report second-quarter 2018 earnings on Jul 24, before the market opens.

Last reported quarter, the company delivered a positive earnings surprise of 22.7%. The bottom line also climbed 8% year over year on the back of high passenger revenues. Moreover, revenues increased more than 9% but fell short of the Zacks Consensus Estimate.

Let's see how things are shaping up for this announcement.

Factors at Play

With oil prices rising since the beginning of this year, such costs are most likely to hurt JetBlue's bottom line in the second quarter, similar to the previous period. The company anticipates fuel cost per gallon between $2.28 and $2.30, much higher than $1.61 reported in the year-ago quarter. The Zacks Consensus Estimate for the same stands at $2.26 per gallon.

Besides fuel costs, costs pertaining to labor could also affect the company's bottom line. Notably, non-fuel unit costs are expected to increase between 2% and 4% in the second quarter.

JetBlue's unit revenue performance in the to-be-reported quarter might further mar results. The company estimates revenue per available seat mile (RASM) to slip approximately 1.2% including a 2.5 point adversity from holiday placement and 1.25 point negativity from completion factor and co-brand incentive payments. The Zacks Consensus Estimate for second-quarter RASM stands at 12.76 cents, below 12.93 reported in the prior-year quarter.

However, the negative effects could be slightly offset by the reduced effective tax rate arising from the slashed corporate tax rate. The low effective tax rate is likely to aid bottom-line growth.

Earnings Whispers

Our proven model does not conclusively show that JetBlue is likely to beat estimates this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as elaborated below.

Zacks ESP : JetBlue has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 36 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : JetBlue carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

JetBlue Airways Corporation Price and EPS Surprise

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

Stocks to Consider

Investors interested in the broader Transportation sector may consider stocks like United Parcel Service, Inc. UPS , Expeditors International of Washington, Inc. EXPD and Norfolk Southern Corporation NSC as these possess the right combination of elements to deliver an earnings beat this reporting cycle.

UPS has an Earnings ESP of +0.54% and a Zacks Rank of 3. The company will report second-quarter earnings on Jul 25.

Expeditors has an Earnings ESP of +1.54% and a Zacks Rank #2. The company will report second-quarter earnings on Aug 7. You can see the complete list of today's Zacks #1 Rank stocks here .

Norfolk Southern is also a #2 Ranked stock and has an Earnings ESP of +0.28%. The company will announce second-quarter financial numbers on Jul 25.

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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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JetBlue Airways Corporation (JBLU): Free Stock Analysis Report

Norfolk Southern Corporation (NSC): Free Stock Analysis Report

Expeditors International of Washington, Inc. (EXPD): Free Stock Analysis Report

United Parcel Service, Inc. (UPS): 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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