JetBlue Could Be A Good Addition To Your Portfolio Now: Here's Why

On March 16, we issued an updated research report on JetBlue Airways Corporation (NASDAQ:JBLU). The Long Island City, NY-based low-cost carrier performed encouragingly in the fourth quarter of 2014 reporting higher-than-expected earnings. Quarterly earnings were 86% above the year-ago figure. Lower fuel costs boosted the bottom line. Average fuel cost during the reported quarter declined 12.9% to $2.70 per gallon. Moreover, important traffic metrics such as revenue passenger miles, capacity and load factor (% of seats filled by passengers) grew 8.5%, 7% and 1.2%, respectively. The favorable earnings report naturally impacted the stock positively.

Expecting oil prices to remain weak, this Zacks Rank #1 (Strong Buy) carrier projects fuel costs at $1.97 per gallon (inclusive of fuel hedges and fuel taxes) for the first quarter of 2015. While releasing its fourth quarter results, the carrier stated that it expects capacity to increase between 9% and 10% in the first quarter of 2015 and between 7% and 9% for the full year.

Estimates on the Upswing

We note that earnings estimates for JetBlue are exhibiting a healthy uptrend following the strong fourth quarter results. Over the last 60 days, the 2015 Zacks Consensus Estimate of earnings has gone up 29 cents to $1.66 per share on the back of upward revisions by 7 analysts. Likewise, the Zacks Consensus Estimate for 2016 has jumped 25 cents over the last month to $1.80 per share on the back of positive revisions by 5 analysts.

Expansion Efforts in Place

We are impressed with JetBlue’s efforts to expand. In keeping with its expansion motive, the carrier announced in Feb 2015 that it will introduce nonstop flights (twice a day) from Baltimore to Fort Lauderdale, FL. The low-cost carrier intends to launch the new service from November this year. In the same month, the carrier also announced nonstop flights (twice a week) between New York's John F. Kennedy International Airport and Grenada's Maurice Bishop International Airport effective Jun 11, 2015. Through such strategic moves, JetBlue aims to enhance customer satisfaction and attract more fliers, in a bid to boost its top line. Further, the company’s effort to roll out its merchandize platform is well on track. JetBlue has also decided to charge bag fees and squeeze

In view of the above positives, we believe there is significant scope for stock price appreciation at JetBlue in the near term.

Other Stocks to Consider

Apart from JetBlue, investors interested in the transportation industry may also consider stocks like Covenant Transportation Group (NASDAQ:CVTI), Celadon Group Inc.(NYSE:CGI) and Aircastle LTD (NYSE:AYR). All the three stocks carry a Zacks Rank #1.

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