JetBlue stock (NASDAQ:JBLU), which was one of the biggest gainers on Tuesday, soared to almost $7 per share, up by more than 13%. It was up more than 20 percent at its peak on Tuesday.
Although the airline’s earnings were not as good as analysts expected, they were still better than the numbers.
JetBlue’s revenue fell 7% year-over-year in Q2 to $2.4 billion. This was better than Wall Street analysts had predicted. Analysts had predicted a loss of 13 cents a share. However, JetBlue’s net income was only $25 million or 7 cents a share. Net income was down 82% compared to the same quarter last year.
JetBlue’s stock is up 24% in the last year (YTD) after Tuesday’s gains. Can it keep its momentum?
JetBlue moves forward after merger with Spirit rejected
JetBlue moves forward after merger with Spirit rejected
JetBlue was in a tumultuous year earlier this year after a federal judge rejected its bid to buy low-cost carrier Spirit Airlines. JetBlue argued that combining the two mid-sized carriers would create a bigger player to compete against the big three and increase competition in the market. The judge, however, saw things differently and rejected the proposal as it would remove a low-cost airline from the market.
JetBlue was forced to move forward, under the new CEO Joanna Geraghty. She developed a new strategy called JetForward, to drive profitability.
JetForward’s strategy is centered on driving efficiencies, reducing costs, and focusing primarily on the most profitable network.
JetBlue’s President, Marty St. George said, “We are actively investing in our core geographic areas in New York, New England and Florida, while exiting BlueCities and routes that don’t meet the financial hurdle rate.” As we move through the second half, we will announce additional initiatives to enhance our customer value proposition and close the gap between our product offering and our peers, as well as drive significant financial benefits.
JetBlue outlined four pillars in its strategy to generate incremental earnings of $800 million to 900 million from 2025-2027. They include:
- Improving customer service and on-time performance by investing in tools and technologies and other means;
- Refocusing its network on leisure flying, originating from New York, New England and Florida geographies. While exiting 15 cities, and more than 50 unprofitable routes.
- Optimizing product merchandising and offering premium experiences to attract customers who value premium experiences;
- Data-science optimization, new technologies, and productivity improvements in labor and infrastructure will allow for $175 million in structural savings by 2027. It also plans on deferring $3 billion in capital expenditures for new jets until 2029 to improve cash flow and restore the balance sheet.
“ While many of these underlying projects will take time ramping up to their full potential and with the strong foundation JetForward provides, we are poised for $800-$900 million in incremental EBIT between 2025-2027. We expect the benefit to come through evenly over the three years,” Ursula Hurley said, JetBlue’s Chief Financial Officer.
Is JetBlue a buy?
Is JetBlue a buy?
The stock price surge on Tuesday was more about excitement than tangible results. The company’s earnings and revenue were down in the first quarter of 2024, and its outlook for the remainder of the year was not good.
JetBlue expects available seat miles to drop 3% to 6 % in Q3 and 2,5% to 5 % for the entire fiscal year. Revenue is expected to drop between 1.5% and 5.5% in Q3 as well as 4% to 6.0% for the entire year.
The cost per available mile is expected to increase 6% to 8% during Q3 and 6.5% – 8.5% throughout the entire fiscal year. Capital expenditures for Q3 are expected to be $365m and $1.6bn for the full fiscal year.
The stock will not move any time soon despite the new leadership. The company is barely profitable and must still execute on these plans.
JetBlue’s stock is unlikely to rise much in the near term, especially after Tuesday’s huge jump.
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