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JetBlue Airways Stock Plunges 25% in 6 Months: Should You Buy the Dip?
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Shares of Long Island City, NY-based airline JetBlue Airways Corporation (JBLU - Free Report) have not had a good time on the bourses of late, declining in double-digits over the past 180 days. The disappointing price performance resulted in JBLU underperforming its industry in the said time frame as well as the S&P 500, of which the airline is a key member. Additionally, JBLU’s price performance compares unfavorably with that of fellow U.S. airline operators United Airlines (UAL - Free Report) and Alaska Air Group, Inc. (ALK - Free Report) in the same time frame.
Three-Month Price Comparison
Image Source: Zacks Investment Research
Currently trading at $4.87, the stock rebounded 42.39% from its 52-week low of $3.42 on Oct. 31, 2023. However, it still reflects a discount of 35.75% from its 52-week high of $7.58 reached on April 22.
In fact, JetBlue Airways shares have plummeted 71.9% over the past five years.
Given the significant pullback in JBLU’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy JBLU? Let’s find out.
JBLU’s Bearish Guidance for the Current Quarter & Full Year
Last month, despite reporting better-than-expected earnings and revenues in second-quarter 2024, JetBlue Airways witnessed a year-over-year decline in revenues. The downfall was owing to the air traffic control issues in the Northeast which have hurt the company’s passenger revenues.
To this end, JBLU has issued disappointing revenue guidance for third-quarter 2024 and full-year 2024. For third-quarter 2024, total revenues are forecasted to decline in the range of 1.5-5.5%. For 2024, total revenues are forecast to decrease between 4% and 6%.
Capacity (measured in available seat miles) for third-quarter 2024 is now expected to decline in the 3-6% band. For full-year 2024, capacity is envisioned to be down in the 2.5-5% band.
Rising Expenses Weigh on JetBlue Airways Stock
Apart from the revenue and capacity woes, a rise in labor and airport costs is also likely to dent bottom-line growth by resulting in a spike in operating expenses. Evidently, operating expenses were up 7.2% during the first half of 2024.
The surge in operating expenses was caused by an increase in labor costs and fuel expenses. Expenses on salaries, wages and benefits increased 6.2% in the first half of 2024 from 2022 actuals. Consolidated operating costs per available seat mile (excluding fuel and special items) rose 5.4% year over year to 10.40 cents in the first half of 2024. For third-quarter 2024, CASM, excluding fuel and special items, is predicted to climb 6-8% on a year-over-year basis. For 2024, CASM, excluding fuel and special items, is predicted to be up in the 6.5-8.5% band.
The ongoing production cuts adopted by major oil-producing nations and geopolitical tensions are pushing up fuel costs. As fuel expenses represent a key input cost for any airline player, the uptick in these costs naturally does not bode well. Notably, the economic fuel cost per gallon increased 5.1% in second-quarter 2024 to $2.87. For third-quarter 2024, economic fuel price per gallon is expected to be in the $2.82-$2.97 per gallon range, which aligns with the reported figure in the second quarter. Our estimate is currently pegged at $2.91 per gallon.
We are also concerned about JBLU’s high debt levels. The low-cost carrier’s long-term debt level has increased to $5 billion at the end of second-quarter 2024 from $3.1 billion at 2022-end.
Long-Term Debt to Capitalization
Image Source: Zacks Investment Research
Given the headwinds surrounding the stock, the Zacks Consensus Estimate for third-quarter 2024 loss has widened to 42 cents from 19 cents in the past 60 days.
Some Tailwinds
We are impressed by the company's efforts to modernize its fleet. The decision to introduce its hugely successful premium service, Mint, from Newark airport is an added positive. Management expects to save $75 million from the fleet modernization program by 2024-end.
From a valuation perspective, JBLU is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of B.
Image Source: Zacks Investment Research
To Conclude
It is understood that JBLU stock is attractively valued. However, given the abovementioned headwinds, we believe that it is not at all advisable to buy the dip in this Zacks Rank #3 (Hold) stock until the company demonstrates substantial improvement in its performance. We believe investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank supports our thesis.
Image: Bigstock
JetBlue Airways Stock Plunges 25% in 6 Months: Should You Buy the Dip?
Shares of Long Island City, NY-based airline JetBlue Airways Corporation (JBLU - Free Report) have not had a good time on the bourses of late, declining in double-digits over the past 180 days. The disappointing price performance resulted in JBLU underperforming its industry in the said time frame as well as the S&P 500, of which the airline is a key member. Additionally, JBLU’s price performance compares unfavorably with that of fellow U.S. airline operators United Airlines (UAL - Free Report) and Alaska Air Group, Inc. (ALK - Free Report) in the same time frame.
Three-Month Price Comparison
Currently trading at $4.87, the stock rebounded 42.39% from its 52-week low of $3.42 on Oct. 31, 2023. However, it still reflects a discount of 35.75% from its 52-week high of $7.58 reached on April 22.
In fact, JetBlue Airways shares have plummeted 71.9% over the past five years.
Given the significant pullback in JBLU’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy JBLU? Let’s find out.
JBLU’s Bearish Guidance for the Current Quarter & Full Year
Last month, despite reporting better-than-expected earnings and revenues in second-quarter 2024, JetBlue Airways witnessed a year-over-year decline in revenues. The downfall was owing to the air traffic control issues in the Northeast which have hurt the company’s passenger revenues.
To this end, JBLU has issued disappointing revenue guidance for third-quarter 2024 and full-year 2024. For third-quarter 2024, total revenues are forecasted to decline in the range of 1.5-5.5%. For 2024, total revenues are forecast to decrease between 4% and 6%.
Capacity (measured in available seat miles) for third-quarter 2024 is now expected to decline in the 3-6% band. For full-year 2024, capacity is envisioned to be down in the 2.5-5% band.
Rising Expenses Weigh on JetBlue Airways Stock
Apart from the revenue and capacity woes, a rise in labor and airport costs is also likely to dent bottom-line growth by resulting in a spike in operating expenses. Evidently, operating expenses were up 7.2% during the first half of 2024.
The surge in operating expenses was caused by an increase in labor costs and fuel expenses. Expenses on salaries, wages and benefits increased 6.2% in the first half of 2024 from 2022 actuals. Consolidated operating costs per available seat mile (excluding fuel and special items) rose 5.4% year over year to 10.40 cents in the first half of 2024. For third-quarter 2024, CASM, excluding fuel and special items, is predicted to climb 6-8% on a year-over-year basis. For 2024, CASM, excluding fuel and special items, is predicted to be up in the 6.5-8.5% band.
The ongoing production cuts adopted by major oil-producing nations and geopolitical tensions are pushing up fuel costs. As fuel expenses represent a key input cost for any airline player, the uptick in these costs naturally does not bode well. Notably, the economic fuel cost per gallon increased 5.1% in second-quarter 2024 to $2.87. For third-quarter 2024, economic fuel price per gallon is expected to be in the $2.82-$2.97 per gallon range, which aligns with the reported figure in the second quarter. Our estimate is currently pegged at $2.91 per gallon.
We are also concerned about JBLU’s high debt levels. The low-cost carrier’s long-term debt level has increased to $5 billion at the end of second-quarter 2024 from $3.1 billion at 2022-end.
Long-Term Debt to Capitalization
Image Source: Zacks Investment Research
Given the headwinds surrounding the stock, the Zacks Consensus Estimate for third-quarter 2024 loss has widened to 42 cents from 19 cents in the past 60 days.
Some Tailwinds
We are impressed by the company's efforts to modernize its fleet. The decision to introduce its hugely successful premium service, Mint, from Newark airport is an added positive. Management expects to save $75 million from the fleet modernization program by 2024-end.
From a valuation perspective, JBLU is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of B.
Image Source: Zacks Investment Research
To Conclude
It is understood that JBLU stock is attractively valued. However, given the abovementioned headwinds, we believe that it is not at all advisable to buy the dip in this Zacks Rank #3 (Hold) stock until the company demonstrates substantial improvement in its performance. We believe investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank supports our thesis.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.