New York-based carrier JetBlue Airways Corporation (JBLU) has performed impressively in the fourth quarter of 2014 reporting better-than-expected earnings and revenues. The company’s fourth quarter adjusted earnings of 26 cents surpassed the Zacks Consensus Estimate by 3 cents. The earnings beat pleased the investors impacting the stock positively. The stock gained 8.78% to close the Jan 29 trading session at $17.16.
Moreover, earnings were up approximately 86% from the year-ago figure. JetBlue’s quarterly results benefited from low fuel costs. This is because fuel costs account for a major chunk of an airline company's (in this case, JetBlue) operating expenses. Consequently, the persistent drop in oil prices has significantly boosted the bottom line.
Operating revenues increased 5.9% year over year to $1.45 billion in the reported quarter and were in line with the Zacks Consensus Estimate. During the quarter, passenger revenues grew 6.9% and other revenues declined 4.1% from the prior-year quarter.
Operating Statistics
Airline traffic, measured in revenue passenger miles, went up 8.5% year over year to 9.4 billion. Capacity or available seat miles increased 7% from a year ago, while load factor (percentage of seats filled with passengers) improved 120 basis points year over year to 82.1%. Passenger revenue per available seat mile (PRASM) or unit revenue for the reported quarter came in at 11.61 cents, down 0.1%. During the final quarter of 2014, yield per passenger mile fell 1.5% to 14.13 cents.
Expenses
Average fuel cost during the reported quarter declined 12.9% to $2.70 per gallon. We note that the carrier recorded $26 million as quarterly losses pertaining to settling of fuel hedges. Quarterly interest expense declined 9.3%. Operating expense per available seat mile (CASM) for the reported quarter was down 4.5% to 11.17 cents while excluding fuel and profit sharing, CASM decreased 0.9% from the year-ago quarter.
Balance Sheet
JetBlue ended the fourth quarter with unrestricted cash and short-term investments of $708 million. Total debt, at the end of 2014, was $2,233 million compared with $2,585 million at the end of 2013.
Guidance
The company expects CASM for the first quarter of 2015 to decrease in the range of 1.5% to 3.5% from the year-ago quarter level. Excluding fuel and profit sharing, CASM is estimated to rise in the band of 0 to 2% in 2015. The carrier projects capacity to increase from 11% to 13% in the first quarter of 2015 and rise in the 7–9% range in 2015. JetBlue expects to pay off approximately $52 million and $265 million regularly scheduled debt and capital lease obligations by the end of the first quarter and full-year 2015, respectively. Expecting oil prices to remain weak, the carrier projects fuel costs at $1.97 per gallon (inclusive of fuel hedges and fuel taxes) for the first quarter.
Zacks Rank
JetBlue carries a Zacks Rank #1 (Strong Buy). Equally-well ranked stocks in the airline space include United Continental Holdings Inc. (UAL) Southwest Airlines Co. (LUV) and Delta Air Lines Inc. (DAL). All three stocks, like JetBlue, reported better-than-expected earnings in the fourth quarter of 2014, benefiting from low fuel costs.
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