Yahoo Finance Here's Why You Should Retain JetBlue Airways (JBLU) Stock Now
JetBlue Airways’ JBLU efforts to upgrade its fleet are commendable. However, JBLU is grappling with major headwinds like high operating expenses, which are adversely impacting its bottom line.
Factors Favoring JBLU
JetBlue's fleet modernization is impressive, marked by the introduction of the Airbus A321neo and the launch of transatlantic service to London. Its success is further highlighted by the expansion of the Mint service from Newark, with $75 million in savings expected by 2024.
JBLU’s commitment to reduce its debt load is commendable. The company’s long-term debt-to-capital ratio (a measure of financial leverage) is 52.2% lower than the industry average of 65.5%, demonstrating a strong financial standing.
To address the increased demand scenario, JetBlue expanded its network with daily non-stop flights between Boston and Amsterdam, starting September 2023. This follows the success of its New York to Amsterdam service launched in August 2023. Passengers on the Boston-Amsterdam route will enjoy JetBlue's award-winning Mint service. With international air travel picking up, this move reflects JBLU’s prudent management.
Key Risks
High operating expenses, driven by a rise in salaries, wages and benefits, impose a threat to JBLU's bottom line. In 2023, total operating expenses grew 17.1% year over year. Management expects 2024 non-fuel unit costs to increase in the mid-to-high-single-digit range from the 2023 actuals.
Apart from labor costs, high fuel costs are also pushing up operating expenses. The northward movement in the crude price is primarily due to the extension of production cuts by various countries and geopolitical tensions. JBLU’s management anticipates fuel costs per gallon for the second quarter of 2024 to range between $2.85 and $2.95.
JBLU's first-quarter 2024 results showed a loss compared to earnings in the previous year, attributed to low revenues and high costs. Passenger revenues, which account for 93.2% of total revenues, declined to $12.60 due to air traffic control issues in the Northeast.
Due to the above mentioned headwinds, shares of JBLU have declined 28% over the past year compared to its industry’s appreciation of 19.9% in the same time period.
Image Source: Zacks Investment Research
Zacks Rank
JBLU currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks from the Zacks Transportation sector are Wabtec Corporation WAB and Kirby Corporation KEX.
WAB currently sports a Zacks Rank #1 (Strong Buy) and has an expected earnings growth rate of 22.6% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.
WAB has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 11.5%. Shares of Wabtec have surged 63.9% in the past year.
KEX currently sports a Zacks Rank #1 and has an expected earnings growth rate of 42.2% for the current year.
The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of KEX have surged 59.1% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
Kirby Corporation (KEX) : Free Stock Analysis Report
Westinghouse Air Brake Technologies Corporation (WAB) : Free Stock Analysis Report
