JetBlue: Should You Keep Flying?

JetBlue Airways (JBLU) announced third quarter ended September 30, 2015 total operating revenue of $1.687 billion, up 10.4 percent from $1.529 billion during the same period last year.

JetBlue declared third quarter of 2015 net income of $198 million or $0.58 of diluted earnings per share, compared to $79 million or $0.24 of diluted earnings per share in the third quarter of 2014.

Strong growth

The airlines major reported significant year-over-year growth in both its top and bottom lines primarily due to 10.4% of capacity expansion and benefits gained from the ongoing weaker global commodity pricing environment including crude oil & gas, adding to the margins of the company.

The company has also delivered industry-leading capacity growth and notable PRASM expansion through its strategic development plans and superior cost control initiatives.

JetBlue is observed to be successfully extracting the full benefits of the existing weakness in the global commodity pricing environment through excellent execution of its daily operations and delivering year-over-year rising operating margins.

The airlines major has successfully captured the key corporate customers since the launch of its  "Mint" service during 2014 which is a lower-priced solution for business-class customers compared to its peers.
Going forward, JetBlue targets on exceedingly growing the Mint service and thus adding it to the transcontinental flights to Boston in the consecutive year.

JetBlue has gained significant positive response for its unique ticket choices introduced during last month that includes a low-fare option for customers with no free checked bag, which has further made the airliner extremely positive about hitting its $65 million goal for the key effort during this year.

JetBlue is equally focusing on both its low-cost airline customers and the crucial business-class customers by strategically introducing new pricing options for each of them while maintaining the customer’s comfort level.

JetBlue strategically and recently concluded its accelerated share repurchase program and bought back 6.8 million shares priced at $22.06 per share, in line with its continued commitment to deliver improved shareholder returns.

The key airliner is performing brilliantly as observed from the continuously growing stock price performance and its commitment towards delivering enhanced shareholder returns.

Analyst view

TheStreet Ratings Team rates JetBlue Airways Corporation a “Buy” with a ratings score of “A” and primarily driven by the company’s key strengths that are observed in several areas, like its solid net income growth, impressive stock price performance, growing profit margins, outstanding revenue growth and notable growth in earnings per share.

The consensus estimate among 15 polled investment analysts evaluating JetBlue Airways Corporation suggests that the company would outperform the market. This consensus rating is maintained since the investment analyst’s sentiments got better on Dec 01, 2014. The earlier consensus estimate suggested investors to hold their position in the company.

A majority of the key investment analysts are extremely positive about the growth prospects of the key airliner both over the short-term and long-term, encouraged by the significant company strengths and supported by the external macroeconomic environment.

Conclusion

Overall, the investors are advised to purchase equity in JetBlue Airways Corporation looking at the logical company valuations with trailing P/E and forward P/E ratios of 18.46 and 11.15 respectively and comparable to the industry’s average P/E of 16.85, depicting a strategically-valued stock. The PEG ratio of 0.24 depicts healthy company growth and comparable to the industry’s growth average of 0.35. The profit margin of 9.17% also seems satisfactory.
Published on Dec 10, 2015
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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