JetBlue Up On Q1 Earnings Beat, Upbeat RASM View

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JetBlue Airways (JBLU - Free Report) reported better-than-expected earnings and revenues in the first quarter of 2019. The company’s bottom line (excluding 2 cents from non-recurring items) came in at 16 cents per share, which outpaced the Zacks Consensus Estimate of 12 cents. However, quarterly earnings declined on a year-over-year basis due to high costs.

Operating revenues totaled $1,871 million, which surpassed the Zacks Consensus Estimate of $1,865.6 million. Moreover, it compared favorably with the year-ago number. Passenger revenues, which accounted for bulk of the top line (96.3%), improved 6.5% in the quarter under review. Other revenues were up 11.8%.

Additionally, this low-cost carrier issued an encouraging projection with respect to revenue per available seat mile (RASM: a key measure of unit revenue). For the second quarter, JetBlue expects RASM to grow between 1% and 4% year over year.Placement of Easter/Passover holiday in April is expected to positively impact the metric to the tune of 2.25 points. RASM had declined 3.1% to 12.12 cents in the reported quarter.

The company's better-than-expected earnings in the first quarter and upbeat RASM projection for the second quarter pleased investors. As a result, the stock gained value in pre-market trading.

JetBlue Airways Corporation Price, Consensus and EPS Surprise

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JetBlue Airways Corporation Price, Consensus and EPS Surprise | JetBlue Airways Corporation Quote

Other Details

Capacity, measured in available seat miles, expanded 10.1% year over year. Meanwhile, traffic, measured in revenue passenger miles, grew 7.3% in the reported quarter. Consolidated load factor (percentage of seats filled by passengers) contracted 210 basis points year over year to 82.5% as traffic growth was outpaced by capacity expansion in the three-month period.

Average fare at JetBlue during the quarter increased 3.5% to $177.24. Yield per passenger mile inched down 0.7% year over year to 14.15 cents. Passenger revenue per available seat mile (PRASM) decreased 3.2% to 11.67 cents.

In the first quarter, total operating expenses (on a reported basis) rose 10.2% year over year mainly due to higher costs pertaining to salaries, wages and benefits. Average fuel cost per gallon (including fuel taxes) decreased 2% year over year to $2.05.

Moreover, JetBlue’s operating expenses per available seat mile (CASM) inched up 0.1% to 11.63 cents. Excluding fuel, the metric increased 0.9% to 8.66 cents.

JetBlue, carrying a Zacks Rank #4 (Sell), exited the quarter with cash and cash equivalents of $464 million compared with $474 million at the end of 2018. Total debt at the end of the first quarter was $1,539 million compared with $1, 670 million at the end of 2018.

Outlook

For the second quarter of 2019, the carrier expects capacity to increase between 4.5% and 6.5%. The metric is anticipated to improve in the range of 4.5-6.5% for 2019.

Consolidated operating cost per available seat mile, excluding fuel, is expected to increase 1.5-3.5% in the second quarter. For the current year, the metric is still projected to either remain flat or increase up to 2%.

Second-quarter fuel cost, net of hedges, is anticipated to be $2.21 per gallon. The company is well on track to achieve its 2020 EPS target, which is in the $2.5-$3 range. The Zacks Consensus Estimate for 2020 earnings is currently pegged at $2.27.

Total capital expenditures for the second quarter are expected between $330 million and $395 million. The metric is anticipatedin the range of $1200-$1400 million for 2019.