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JetBlue Airways Corporation (NASDAQ: JBLU) has carved a niche for itself in the aviation space with affordable fares and operational efficiency that have made the airline the choice of many budget travelers. For the company, 2023 could be the year of its return as it can generate sustainable profits, taking advantage of the recovery of passenger traffic.
Savings
Shares of JetBlue made a brief recovery after suffering heavy losses early in the pandemic, but have since retreated and been swimming in single-digit territory for most of the past year. Although investor sentiment has improved since its last earnings report amid positive signs of long-term profitability, JBLU has a long way to go before creating meaningful shareholder value.
Read management/analyst commentary on JetBlue’s Q3 2022 earnings
The airline industry got a much-needed boost last year as passenger traffic grew steadily after falling behind the curve in travel related to COVID. For JetBlue shareholders, however, it’s time to be patient and see how things turn out this year. It is not a good idea to sell stocks at a low price. When buying, uncertainty at the operational and macro levels makes stocks a risky bet. Experts warn that JBLU could remain close to current levels until the end of the year.
Flying High
JetBlue is probably the most popular low-cost airline in America, but it provides passengers with good facilities and operates a relatively young aircraft fleet. The next two years will be crucial for the company as it considers management initiatives to grow in scale, including the upcoming acquisition of Spirit Airlines. The $3.8 billion deal will make the company the fifth largest airline while allowing it to improve its competitive position. In addition, there are plans to expand the alliance with American Airlines.
Meanwhile, it will be a challenging task for the company to improve its margins, as operating costs are elevated led by record high fuel prices. Efforts to tackle the unfavorable cost environment over structural cost program which is estimated to save $250 million by 2024.
Finance
Analysts expect JetBlue to post earnings of $0.21 per share for the quarter ending September 2022, reflecting an improvement in operating conditions from the year-ago quarter when the company posted a loss. Fourth quarter earnings benefited from approximately 31% growth in revenue to $2.41 billion. The report is scheduled to be released on January 26. In the third quarter, the company registered its first profit in around three years – after being hit by the COIVD-induced travel slump. Third-quarter revenue rose to $2.5 billion year over year, yielding adjusted earnings of $0.21 per share.
From JetBlue’s Q3 2022 earnings call:
“We have made good strides in hiring, and now we believe that we have the right resources from a staffing point of view, which should also translate into better productivity. Going forward, we expect our momentum to continue through another quarter of the pretax margin mid-single-digits in the fourth quarter. We will be further ahead in 2023 as we continue to restore pre-pandemic revenue strength. We continue to see a very healthy revenue environment with no signs of demand for air travel.
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JBLU’s performance has been encouraging this year, making small but sustained gains so far. At $8.70, on Monday the stock was trading close to its position six months ago.
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