JetBlue Airways Corporation (JBLU) stock took a tumble on Tuesday after the airline reported its third-quarter earnings, despite beating analyst expectations on both earnings per share and revenue. While the results showcased some positive signs, the market’s focus shifted towards the company’s outlook for the coming quarters, particularly the anticipated revenue decline and rising costs.
JetBlue reported an adjusted loss per share of $0.16 for the third quarter, exceeding the consensus loss of $0.26 and marking a significant improvement from the $0.39 loss recorded a year ago. Revenue also surpassed expectations, reaching $2.365 billion, a slight 0.51% increase compared to the same period last year. This growth outpaced the consensus estimate of $2.34 billion.
Despite the positive earnings figures, JetBlue’s operating margin saw a 5-point improvement, moving from a negative 6.6% a year ago to a negative 1.6% in the third quarter. The adjusted operating margin also saw a notable improvement, reaching negative 0.4% from negative 5.2% in the previous year. This improvement was primarily attributed to a 4.2% decline in operating expenses, reaching $2.403 billion for the quarter.
However, the company’s guidance for the fourth quarter and 2024 painted a more cautious picture. JetBlue anticipates a year-over-year revenue drop of 7% to 3% in the fourth quarter. The airline also expects Available Seat Miles (ASMs) to decrease by 7% to 4% YoY. Looking ahead to 2024, JetBlue forecasts a year-over-year revenue decline of 5% to 4% and a reduction in ASMs of 4.5% to 2.5%. These projections, coupled with the expected rise in CASM ex-fuel by 13% to 15% in the fourth quarter and 7% to 8% in 2024, likely contributed to the investor jitters.
Despite the stock’s decline, JetBlue’s management remains optimistic about the company’s long-term prospects. Marty St. George, JetBlue’s president, highlighted the company’s focus on returning to operating profitability and emphasized the importance of growing unit revenue to achieve this goal. He expressed confidence in the future, citing the continued positive trend in unit revenue and the anticipated benefits of the JetForward initiatives.
Ursula Hurley, JetBlue’s CFO, also highlighted the company’s progress in improving its operating margin, attributing the improvement to stronger revenue, operational gains, and lower fuel costs. She reiterated the company’s commitment to achieving its 2024 EBIT target of $800–$900 million, showcasing confidence in the company’s long-term financial performance.
While JetBlue’s third-quarter earnings beat expectations, the market’s focus on the projected revenue decline and rising costs in the coming quarters resulted in a significant stock drop. Investors will be closely watching the company’s progress in executing its growth strategies and achieving its financial targets in the coming months.
