Gaining Over 20% This Year, What Lies Ahead For JetBlue Stock Following Q1 Results?

JetBlue Airways (NASDAQ: JBLU) will report its Q1 2024 results on Tuesday, April 23. We expect the company’s top line to come in at $2.2 billion, and the bottom line at $(0.50), compared to the consensus estimates of $2.2 billion, and $(0.52), respectively. Although we expect JetBlue to post upbeat results in Q1, we believe its stock is fully valued at its current levels of a little under $7.  See our interactive dashboard analysis on JetBlue Airways Earnings Preview for more details on how JetBlue’s revenues and earnings will likely trend for the quarter. So, what are some of the trends that are likely to drive United Airlines’ results?

Firstly, let us look at JBLU stock performance in recent years. JBLU stock has suffered a sharp decline of 55% from levels of $15 in early January 2021 to around $7 now, vs. an increase of about 35% for the S&P 500 over this roughly three-year period. Notably, JBLU stock has underperformed the broader market in each of the last 3 years. Returns for the stock were -2% in 2021, -54% in 2022, and -14% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that JBLU underperformed the S&P in 2021, 2022, and 2023.

In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for heavyweights in the Industrials sector including CAT, GE, and UNP, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could JBLU face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months — or will it see a recovery? From a valuation perspective, we think JBLU is appropriately priced at around $7. We estimate JetBlue’s Valuation to be a little over $6 per share. Our forecast is based on 0.2x sales for JetBlue, compared to its last eight-quarters average of 0.3x.

Coming to the latest quarter, the company will likely continue to benefit from the robust travel demand. However, the issues related to Pratt and Whitney’s geared turbofan engines may result in some aircraft out of service, weighing on the company’s overall performance. Earlier this year, a federal judge blocked JetBlue from acquiring Spirit Airlines. Following this, the company decided to cut some of its routes to return to profitability.  The airline exited Baltimore and suspended some routes from New York.

Looking at the previous quarter, JetBlue’s revenue of $2.3 billion in Q4 reflected a 4% y-o-y decline, as a 3.3% rise in available seat miles was more than offset by a 7.5% fall in passenger revenue per available seat mile. The capacity is expected to remain lower in 2024, given the engine inspections by Pratt & Whitney. JetBlue’s operating margin contracted 470 bps to -2.9% in Q4 amid higher costs. Lower revenues and margin resulted in the bottom-line falling to a $0.19 loss per share versus profit per share of $0.22 in the prior-year quarter.

The average fuel price per gallon declined 17% y-o-y to $3.08 for JetBlue in the previous quarter. However, this metric may rise sequentially due to higher average fuel prices in Q1 weighing on the operating margin. The average U.S. Gulf Coast Kerosene Jet fuel price per gallon rose from $2.39 (end of December last year) to $2.59 toward the end of March 2024.

While JBLU stock appears appropriately priced for now, it is helpful to see how JetBlue Airways’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 4/16/2024
[2] Cumulative total returns since the end of 2016

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