Although 2016 was a great year for airline stocks, there were some stocks that did not manage to find their way into the green.
Several companies such as Spirit Airlines (SAVE, Financial), Southwest Airlines (LUV, Financial) and United Continental Holdings (UAL, Financial) performed well in 2016. As a matter of fact, Spirit Airlines was the aviation industry's best-performing stock in 2016.
But JetBlue Airways Corp. (JBLU, Financial) was one of the aviation stocks that disappointed stockholders in 2016 as the stock was down 1%. Moreover, the stock is off to a dreadful start this year as it is down approximately 10% year to date. On the positive side, the inadequate performance of JetBlue creates a buying opportunity for stockholders looking to profit from airline stocks.
JetBlue reported its fourth-quarter results on Thursday. In the fourth quarter, the company detailed earnings per share of 50 cents, beating the analysts' estimate by 1 cent. The company’s revenue came in at $1.64 billion, in line with the analysts' estimate and representing a surge of approximately 3% on a year-over-year basis.
The company’s operating expenses in the fourth quarter surged 6.5% compared to 2015. Interest expense for the quarter dropped 13.2% as the company is focusing on reducing its debt. Currently, the company has $1.3 billion of debt, down considerably from $3.1 billion at the end of 2011.
Over the past few years, JetBlue’s earnings have been growing at a healthy pace and the primary reason behind the earnings growth is the rollout of its Mint premium service. The company has also been able to steadily grow its top line by surging its service to other cities as well as countries.
JetBlue has introduced aircrafts with an amplified number of seats and prolonged the number of flights accessible on a seasonal basis. Furthermore, the company detailed that its Mint service is showing massive signs of positive growth and also helping in producing huge profits on routes that had been constant underperformers.
Before the launch of Mint service, the company’s New York-Los Angeles and New York-San Francisco routes were generating poor margin. However, after the launch of Mint service, things have changed completely as the company is now generating decent profit margins from these routes. Most importantly, the company also doubled its capacity on these routes which throws light on massive improvements.
Summing up
Although JetBlue disappointed stockholders in 2016, it is likely the company will successfully reverse its fortunes this year. The company continues to maintain a vigorous cash position. Moreover, the company is also on its way to boosting its services to Bermuda which would help it generate additional revenue.
Apart from this, the company is also aggressively focusing on expanding its Mint service in other markets and expects to double the overall fleet proposing Mint service this year. Also, JetBlue has decided to repay $50 million of debt per quarter.
Bearing in mind the success of JetBlue’s new Mint service program and its future prospects, JetBlue is a strong buy at current market price.
Disclosure: No position in the stocks mentioned in this article.
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