JetBlue Airways is set to report its Q1 2024 results, with expectations of a top line of $2.2 billion and a bottom line of $(0.50), compared to consensus estimates of $2.2 billion and $(0.52). Despite the anticipated upbeat results, the stock is considered to be fully valued at its current level of just under $7. Over the past few years, JetBlue stock has seen a sharp decline of 55%, underperforming the S&P 500 annually. With the current uncertain macroeconomic environment, including high oil prices and elevated interest rates, there are concerns about JetBlue’s performance in the next 12 months.
JetBlue has faced challenges related to Pratt and Whitney’s geared turbofan engines, which may impact the company’s overall performance as some aircraft may be out of service. Earlier this year, a federal judge blocked JetBlue from acquiring Spirit Airlines, leading the company to cut some routes in order to return to profitability. In the previous quarter, JetBlue’s revenue declined by 4% year-over-year, with a decrease in passenger revenue per available seat mile. The airline’s operating margin contracted in Q4 amid higher costs, leading to a loss per share compared to the prior year.
The average fuel price per gallon for JetBlue declined by 17% year-over-year in the previous quarter, but may rise sequentially due to higher average fuel prices in Q1. The average U.S. Gulf Coast Kerosene Jet fuel price per gallon also increased from $2.39 to $2.59 by the end of March 2024, impacting operating margins. While JetBlue stock is currently considered appropriately priced, it is important to consider how the company’s peers are performing on important metrics to assess its standing in the industry.
It has been challenging for individual stocks to consistently outperform the S&P 500 in recent years, with JetBlue experiencing underperformance annually. However, the Trefis High Quality Portfolio, which includes 30 stocks, has consistently outperformed the benchmark index over the same period. The current valuation for JetBlue is estimated to be a little over $6 per share, based on 0.2x sales for the company compared to its historical average of 0.3x. The company’s performance in Q1 will likely be influenced by factors such as travel demand, engine issues, and route adjustments to ensure profitability.
Overall, JetBlue Airways faces a challenging macroeconomic environment with high oil prices and interest rates, leading to uncertainties about its performance in the upcoming quarter. Despite expected upbeat results for Q1, concerns remain about the company’s ability to outperform the S&P 500 and its peers in the future. Investors will be closely watching JetBlue’s Q1 results to assess its performance and outlook in a competitive and volatile market.
