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Is JetBlue Airways a Buy?



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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Shares of JetBlue Airways (NASDAQ: JBLU) They have been stuck in the asphalt, leaving most of the rest of the industry in the last three years. The company has been plagued by skyrocketing expenses and inconsistent demand in addition to the volatile price of fuel that all airlines have had to weather. "Data-reactid =" 11 "> Actions of JetBlue Airways (NASDAQ: JBLU) They have been stuck in the asphalt, leaving most of the rest of the industry in the last three years. The company has been plagued by skyrocketing expenses and inconsistent demand in addition to the volatile price of fuel that all airlines have had to weather.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "JetBlue was an industry favorite in the years after its 2000 debut, and the current management has a plan in place To recover that status among investors. The company expects to double earnings for 2020, reversing the steep declines in earnings in 2017 and 2018. "data-reactid =" 12 "> JetBlue was an industry favorite in the years after its 2000 debut, and management The current company has a plan in place to recover that status among investors, the company expects to double profits for 2020, reversing the sharp falls in profits in 2017 and 2018.

A line of JetBlue tail fins.

JetBlue is looking to recover its cruising altitude. Image source: JetBlue Airways.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The first quarter of the airline continued the negative trend, with JetBlue reports decrease in revenue and profits. But management expressed confidence that their plan is on track and should start showing results in the second half of this year. "Data-reactid =" 34 "> The first quarter of the airline continued the negative trend, with JetBlue reporting falls in revenues and profits, but management expressed confidence that its plan is underway and should begin to show results in the second half of this year.

Let's look at the airline's plan to return to a cruise altitude and consider whether JetBlue's shares are a purchase today.

Low costs, high rates

JetBlue is in the final stages of a program announced in December 2016 designed to reduce costs by more than $ 300 million annually. Much of that work is being done behind the scenes, in areas such as maintenance and programming of airport staff and crew, and has been achieved through the introduction of new software tools to better manage the inventory of spare parts and optimize work hours.

The airline has also invested in technology to automate airport registration and reduce personnel costs. In total, these incremental cost savings are expected to increase earnings per share between $ 0.30 and $ 0.40 for next year.

JetBlue is also following industry trends to increase revenue. By 2020, the airline will launch a basic economic ticket class aimed at the most price-sensitive buyers, which will allow it to compete better on leisure routes and potentially add additional revenue through additional service fees.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The airline already had & nbsp;increased your registered baggage fee& nbsp; in 2018. Some analysts have pressed for JetBlue to increase revenues by charging for Internet in flight, but with rivals Delta Airlines moving towards eliminating your wifi rate, that could be a difficult lever for JetBlue to pull now. "data-reactid =" 40 "> The airline had already increased its baggage rate registered in 2018. Some analysts have pressed for JetBlue to increase revenues by charging for the flight Internet, but with rival Delta Airlines move towards eliminating your Wi-Fi rate, which could be a difficult lever for JetBlue to pull now.

A more concentrated road map.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Part of the JetBlue plan to increase profitability is for the The airline will focus its operations on three key airports: John F. Kennedy of New York, Fort Lauderdale, Florida and Boston.The airline is trying to increase its market share and profitability in New York without adding flights at the highly congested airport when exchanging out 150 seats Airbus& nbsp; A320 for A321 with 200 seats. "data-reactid =" 42 "> Part of JetBlue's plan to increase profitability is for the airline to concentrate its operations at three key airports: John F. Kennedy of New York, Fort Lauderdale, Florida, and Boston. trying to increase its market share and profitability in New York without adding flights at the highly congested airport by exchanging 150 seats Airbus A320s for A321s of 200 seats.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Boston has been the main success story of corporate travel JetBlue, but the airline is increasingly in a dog fight against Delta For more lucrative business customers. JetBlue is also improving aircraft in Boston to generate higher margins, and the city is the focus of JetBlue's plan to launch transatlantic flights in 2021. The airline says that corporate customers have been crying out for the opportunity to fly JetBlue to Europe, and the addition of the London service could help secure more corporate travel contracts. "Data-reactid =" 43 "> Boston has been the principal JetBlue corporate travel success However, the airline is increasingly in a dogfight against Delta for more lucrative business customers JetBlue is also improving planes in Boston to generate higher margins, and the city is the focus of the plan JetBlue to launch transatlantic flights in 2021. Corporate customers have been clamoring for the opportunity to fly JetBlue to Europe, and the addition of the London service could help secure more corporate travel contracts.

A JetBlue plane on the runway.

Image source: JetBlue Airways.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Fort Lauderdale is mainly a leisure market, but JetBlue is has maintained well despite the competition from ultra low cost rivals, including & nbsp;Spirit Airlines & nbsp;and Frontier Airlines. The JetBlue routes are likely to gain momentum next year when they start offering basic economic fares: the airline's attempt to match the price of Spirit and others while offering at least some of its higher-quality services and services. . "Data-reactid =" 69 "> Fort Lauderdale is primarily a leisure market, but JetBlue has remained well despite the competition from its ultra-low cost rivals, including Spirit Airlines and Frontier Airlines. It is likely that JetBlue's routes will receive a boost next year when it begins to offer basic economic fares: the airline's attempt to equal the price of Spirit and others while offering at least some of its higher-quality services and amenities. .

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Meanwhile, JetBlue is & nbsp;reducing its footprint in Long Beach, California.& nbsp; – its original west coast center – and closing stations that include Washington Airport, D.C. Dulles, Daytona Beach, Fla., and St. Croix, U.S.V.I. In October, the administration estimated that its renewed network will increase revenues from $ 100 million to $ 120 million by 2020. "data-reactid =" 70 "> Meanwhile, JetBlue is reducing its presence in Long Beach, California – its West Coast The central and closing stations include Dulles Airport in Washington, DC, Daytona Beach, Fla. and St. Croix, USVI In October, management estimated that its renewed network will increase revenue from $ 100 million to $ 120 million for 2020.

So, is JetBlue a purchase?

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Robin Hayes, CEO of JetBlue said in april"We remain committed to our goal of generating earnings per share between $ 2.50 and $ 3.00 by 2020," adding that the airline expects to generate margin expansion from the end of 2019 until 2020. That would suggest that there is upside potential for the current 2020 consensus estimate of $ 2.27 per share. "data-reactid =" 72 "> JetBlue CEO Robin Hayes said in April:" We remain committed to our goal of generating earnings per share between $ 2.50 and $ 3.00 by 2020, "adding that the airline expects the expansion of the generation margin as of the end of 2019 and in 2020. That would suggest that there is potential upside potential for the current 2020 consensus estimate of $ 2.27 per share.

Unfortunately, as any vacation planner knows, talking about getting to a destination is much easier than getting there. One of the reasons why the Wall Street estimates for 2020 remain so stubbornly low is that JetBlue will have to drastically increase revenues per seat mile available from now until 2020 to be close to the $ 2.50 per share guidance.

JetBlue's path to $ 2.50 implies continuing to increase margins in Boston, New York and Fort Lauderdale, and the hope that new tariff options will drive higher market share and revenue by 2020. It's a reasonable plan, but far from be determined.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Meanwhile, JetBlue's actions are far from being a The company is quoted at a company value of EBTDA 7.9 times, slightly ahead of better performance Delta. "Data-reactid =" 75 "> Meanwhile, JetBlue's shares are far from being a bargain, with the company listed at 7.9 times EBITDA, slightly above Delta's best performance.

The existing incumbents probably do well sitting and letting the change take place, but I see little reason to buy at this time. JetBlue is a warehouse.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 77 "> More from The Motley Fool

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Lou Whiteman It has no position in any of the actions mentioned. The Motley Fool owns shares and recommends Delta Air Lines and Spirit Airlines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy."data-reactid =" 85 ">Lou Whiteman has no position in any of the actions mentioned. The Motley Fool owns shares and recommends Delta Air Lines and Spirit Airlines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.

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