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JetBlue Airways (JBLU) Q1 Earnings: Disappointment in Store?

Zacks Equity Research
Updated

JetBlue Airways Corporation JBLU is scheduled to report its first-quarter 2017 results on Apr 25, before market opens.

In the fourth quarter of 2016, this low-cost carrier had delivered a positive earnings surprise of 2.04%. Operating revenues came in at $1,641 million. The top line improved 2.9% from the year-ago figure.

However, things might not be so rosy for the company in the first quarter. The negative sentiment surrounding the stock can be gauged from the fact that the Zacks Consensus Estimate for the first quarter has decreased over 39% over the last three months.

In fact, the stock has struggled recently, underperforming the Zacks categorized Transportation-Airline industry in the last three months. The stock has declined 1%, whereas the industry has gained 1.6%.

 

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Our quantitative model too does not show conclusively that JetBlue Airways will beat earnings in the first quarter of 2017. According to our proven model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings surprise. However, that is not the case as highlighted below.

Zacks ESP: The Earnings ESP for JetBlue Airways is -12.00%. This is because the Most Accurate estimate is 3 cents below the Zacks Consensus Estimate of 25 cents. 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 which increases the predictive power of ESP. However, the company’s -12.00% ESP complicates our surprise prediction.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) 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

Factors Likely at Play

We expect the bottom line in the first quarter to be hurt by higher expenses due to the recent labor deals inked by the company and the spike in fuel costs. Consequently, the carrier expects consolidated operating cost per available seat mile, excluding fuel, to grow in the band of 3% to 5%. Fuel price is also projected to rise to $1.73 per gallon in the first quarter from $1.56 recorded in the fourth quarter. Operating revenue per ASM (RASM) is anticipated to decline approximately 4.8%.

We are, however, impressed by JetBlue Airways’ efforts to expand its operations.  The company’s efforts to attract more passengers should boost the top line in the first quarter. Further, its efforts to reduce debt levels also raise optimism.

In a bid to meet the surge in demand, the carrier recently announced that it intends to expand its premium service (Mint). Following the move, this low-cost carrier intends to operate 70 Mint flights by Dec 31, 2017. We expect a further update on the Mint issue on the conference call.

Stocks to Consider

Investors interested in the broader transportation space may consider American Airlines Group AAL, Air Lease Corporation AL and C.H. Robinson Worldwide CHRW as our model shows that these companies possess the right combination of elements to post an earnings beat in their upcoming releases.

American Airlines has an Earnings ESP of +7.55% and a Zacks Rank #3. The company will report first-quarter results on Apr 27.

Air Lease has an Earnings ESP of +1.16% and a Zacks Rank #3. The company will report first-quarter results on May 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

C.H. Robinson has an Earnings ESP of +2.50% and a Zacks Rank #3. The company will report first-quarter results on Apr 25.

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JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
 
American Airlines Group, Inc. (AAL): Free Stock Analysis Report
 
Air Lease Corporation (AL): Free Stock Analysis Report
 
C.H. Robinson Worldwide, Inc. (CHRW): Free Stock Analysis Report
 
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Zacks Investment Research