Why JetBlue Airways Corporation Stock Lost Altitude This Week

Disappointing earnings caused JetBlue to descend.

Nickey Friedman
Nickey Friedman
Apr 25, 2014 at 6:36PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of airline JetBlue Airways Corporation (NASDAQ:JBLU) swooped down as much 7% this week following release of its fiscal-first-quarter results.

So what: Operating revenue lifted 3.8% to $1.3 billion. Operating income plunged 31% to $41 million. Net income crashed 71% to $4 million or $0.01 per diluted share. Despite being barely profitable, it was the 16th quarter in a row of profitability.

The earnings results were substantially off the $0.07 per share analysts were expecting. JetBlue Airways blamed "severe winter weather in the Northeast" for the shortfall. The company had to cancel 4,100 flights which it estimates cost the airline $50 million in revenue and $35 million in operating income in which cut its operating income nearly in half.

To put into perspective, JetBlue Airways cancelled more flights in this single quarter than it cancelled in total for all of 2013. Eighty percent of its flights are normally in the Northeast, so the bad winter storms directly affected JetBlue Airways more than many other airlines.

Now what: On a positive and more meaningful note, JetBlue Airways achieved "year over year improvements in yield and fare while growing capacity" according to Robin Hayes, JetBlue Airway's president. He expects JetBlue Airways to show "year over year unit revenue growth to accelerate" for the second quarter.

JetBlue Airways anticipates that things will return to normal for the balance of 2014, and that it expects expanded margins and shareholder returns. Based on analyst estimates, JetBlue Airways trades at a forward P/E of 11 based upon its current share price -- on the cheap side compared to other regional airlines -- and estimated earnings per share of $0.71 for the fiscal year ending December 2014.