JetBlue (NASDAQ: JBLU) recently reported its Q4 results, with revenues meeting and earnings exceeding the street estimates. The company reported operating revenue of $2.28 billion and an adjusted loss of $0.21 per share, compared to the consensus estimates of $2.25 billion in sales and a loss of $0.31 per share. However, the company’s outlook fell short of expectations and JBLU stock nosedived 26% on Tuesday, January 28. As an aside, after a good earnings report, Should You Pick FFIV Stock At $300?
JBLU stock, with 8% returns since the beginning of 2024, has underperformed the broader S&P 500 index, up 27%. An increased competition in some of its routes and the impact of the recall of Pratt & Whitney engines have weighed on the company’s performance lately. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
JetBlue’s revenue of $2.28 billion in Q4 reflected a 2.1% y-o-y decline, given a 5.1% fall in available seat miles, and a 0.4% fall in average yield, partly offset by a 210 bps rise in load factor. The capacity was impacted due to engine inspections by Pratt & Whitney. JetBlue saw a 0.4% decline in operating expense per available seat mile in Q4. Its adjusted pre-tax margin stood at -3.5% in Q4, compared to -3.6% in the prior-year quarter.
Looking forward, JetBlue expects its capacity to decline between 2% and 5%, and its revenue per available seat mile to grow between -0.5% to 3.5% in Q1. The street was anticipating a 7% growth in RASM. Furthermore, it expects its CASM Ex-Fuel to rise 8% to 10% in Q1, amid higher labor and maintenance related costs. Looking at the full-year 2025 outlook, JetBlue expects ASMs to remain flat, RASM to rise 4.5% and CASM Ex-Fuel to see 6% growth at the mid-point of the range.
Now, some of this downbeat outlook can be attributed to the grounding of aircraft for Pratt & Whitney inspections. In their recent earnings conference call, company management disclosed a 2.5-point negative impact on the 2024 operating margin attributable to groundings. This impact is projected to escalate to 3 points in 2025, given the anticipated increase in groundings to the mid-to-high teens. JetBlue expects the grounding situation to improve only from 2027.
What does this mean for JBLU stock?
Although JetBlue posted an upbeat Q4, its underwhelming outlook resulted in its stock dropping post the Q4 announcement. Even if we look at a slightly longer period, the decrease in JBLU stock over the last four-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were -2% in 2021, -54% in 2022, -14% in 2023, and 42% in 2024.
In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and change in the White House, could JBLU face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months — or will it see a recovery? While we will soon update our model for JetBlue to reflect the latest results, we think there is little room for growth for its stock, despite its recent fall. At its current levels of around $6, JBLU stock is trading at 0.2x trailing revenues, versus the stock’s average P/S ratio of 0.4x over the last four years. Now, a slight decline in the valuation multiple versus the historical average seems justified, given the weak outlook and grounding headwinds for the next few years. We think investors willing to pick an airline stock will likely be better off going with Delta or United for robust long-term gains. Also, look at our take on How DeepSeek’s AI Model Impacts AVGO Stock?
While JBLU stock looks like it has little room for growth, it is helpful to see how JetBlue Airways’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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