Don't Sell JetBlue Airways (JBLU) Stock Now -- Here's Why
Zacks Investment Research | Sep 11, 2017 03:20AM ET
On Sep 8, we issued an updated research report on key low-cost airline, JetBlue Airways Corporation (NASDAQ:JBLU) .
The stock has performed disappointingly so far this year. The stock lost 16.6% while its industry gained 7.8% on a year-to-date basis.
Why the Slide?
JetBlue has been hurt by multiple headwinds leading to the above underperformance. High costs are expected to negatively impact the bottom line in the third quarter. Also, while releasing its second-quarter results in July this year, the company stated that unit costs, excluding fuel, are expected to grow in the band of 1.5% to 3.5% for the same period.
Adding to its woes, the carrier recently provided a bearish view on operating revenue per available seat miles (RASM) for the third quarter. JetBlue now expects RASM in the band of -1% to +1% (on a year-over-year basis). The earlier projection had called for the metric between -0.5% and + 2.5%. The company attributed the reduction in the guidance to the prevalent competitive pricing environment. JetBlue also trimmed its capacity growth projection to the range of 6% to 7% range from 6.5% to 7.5%, projected earlier.
Moreover, Irma is likely to hit JetBlue hard because it has significant exposure to Florida with two hubs in the state, Orlando and Fort Lauderdale. The company also has a hub in Puerto Rico.
Notably, JetBlue is not the only one to slash its unit revenue forecast. Fellow-carriers like Southwest Airlines (NYSE:LUV) and United Continental Holdings (NYSE:UAL) have trimmed their respective current-quarter unit revenue forecasts.
Certainly Not a Broker Favorite
Given the challenges faced by the company, it is natural that the stock is not a brokers’ favorite right now. The stock has witnessed the Zacks Consensus Estimate for current-quarter earnings being revised 3.2% downward over the last 30 days. Also, for full-year 2017, the Zacks Consensus Estimate moved down 1.5% in the same time period.
Given the wealth of information at the disposal of brokers, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions. The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Some Positives Remain
JetBlue's efforts to expand its popular premium service (Mint), however, raise optimism in the stock. The carrier intends to operate 70 Mint flights by Dec 31, 2017. In fact, it aims to offer the service for approximately one out of 14. We are also impressed by the company's efforts to modernize its fleet.
Get The News You Want
Efforts to reduce debt levels are also encouraging. Furthermore, the carrier's deal with Goldman Sachs (NYSE:GS) for implementing an accelerated share buyback program is another positive.
Due to the positives, we believe dumping the stock now will be foolhardy despite its recent struggles.
Additionally, the Zacks Rank #3 (Hold) carried by the stock is a confirmation that investors should currently hold on to the stock as it is expected to perform in line with the broader market over the next one to three months.
Stock to Consider
Investors interested in the airline space may consider SkyWest Inc. (NASDAQ:SKYW) sporting a Zacks Rank #1 (Strong Buy). You can see .
SkyWest witnessed the Zacks Consensus Estimate for current-year earnings being revised 1.9% upward over the last 60 days.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.