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Zack’s Bull of the Day: JetBlue Air

Gasoline prices have declined almost 40% since June 2014, and it has benefited several market sectors, but none more than airlines.  Yet gas prices are not the only thing one airline company is benefiting from; JetBlue Airways, has also maintained a strong commitment to cost control, and improved operations while experiencing declining gas prices.  These combined factors have made JetBlue Airways our Zacks Bull of the Day.

JetBlue Airways (NASDAQ:JBLU) a Zacks Rank #1 (Strong Buy) is a low-fare, low-cost passenger airline, which provides high-quality customer service primarily on point-to-point routes is based in New York’s JFK International airport.  JetBlue carries more than 32 million customers a year to 87 cities in the U.S., Caribbean and Latin America with an average of 850 daily flights.  Further, the company announced that they will be offering services to Cleveland, and Reno-Tahoe NV in the spring of 2015.

Positive News

In late January, JetBlue announced Q4 14 results, and they beat the Zacks Consensus Earnings Estimate by 13.04%, and met on the top line.  Further, Q4 14 saw record revenues of $1.4 billion for the company (analysts had high expectations).  Importantly, the company saw year over year increases in Revenue Passenger Miles (+8.5% to 9.4 billion), and capacity increased 7%.  Going forward capacity is expected to increase between 11% and 13% in the first quarter 2015 and between 7% and 9% for the full year.

Management was also able to decrease interest expenses by 9.3% ($3 million), and cut operating expenses per available seat mile by 4.5%.  Moreover, the company also improved their on-time departures, one of their main operational goals for 2014.

Due to fuel expense hedging, JetBlue saw a realized fuel price of $2.70 per gallon in Q4 14, a 12.9% decrease from a year ago quarter, where the fuel price was $3.10. For Q1 15, management expects an average price per gallon to be $1.97.

Rising Estimates

Over the past 30 days earnings estimates have risen for Q1 15, Q2 15, FY 15 and FY 16.  Q1 15 rose from $0.21 to $0.35, Q2 15 increased from $0.36 to $0.43, FY 15 jumped up from $1.29 to $1.66, and FY 16 rose from $1.47 to $1.80.

The table below shows the Price and Consensus Estimates for JetBlue.  As you can see expectations have been rising over the near term.

Bottom Line

A combination of suppressed oil prices, improved operations, and solid cost cutting measures have JetBlue positioned to see significant earnings growth over the next quarter.

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