Airline carrier JetBlue NASDAQ: JBLU has been recovering on the reopening trend as pent-up demand is bolstering its recovery towards 2019 pre-pandemic levels. Being an epicenter industry stock should provide no surprise when revenues rose triple digits since the peak of the pandemic in Q2 2020. The Company is managing to pay down debt and limit losses and daily cash burn with little exposure internationally beyond the Caribbean and Latin America. Domestic travel is continuing to rebound pushing the Company into positive cash flow in Q2 2021. The Company is working to improve margins and repairing its balance sheet. Investors are looking into the holiday travel and vacation season to see if pent-up travel demand explodes this winter. Prudent investors with a long-term horizon looking to gain exposure in this recovering industry can watch for opportunistic pullbacks in shares of JetBlue.
Q2 FY 2021 Earnings Release
On July 27, 2021, Jet Blue released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported an earnings-per-share (EPS) loss of (-$0.65) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.74), a $0.09 beat. Revenues grew 597.2% year-over-year (YoY) to $1.5 billion beating analyst estimates for $1.44 billion. Q2 saw strong signs of consumer strength and the return of travel demand. The Company reduced debt by $1.2 billion to $0.9 billion which is below pre-pandemic levels and the Company’s adjusted debt to capital was 55%. The Company ended the quarter with $3.7 billion in cash and cash equivalents or 46% of 2019 revenue. JetBlue CEO Robin Hayes commented, “In the second quarter, we saw strong signs that consumer confidence and travel demand is returning, with second-quarter revenue doubling compared to the first quarter driven by pent-up demand. As we turn to recovery, we continued to generate positive cash from operations in the second quarter, and we expect continued improvement in our operating performance as we progress towards a full recovery. We are creating a path to restore our earnings power to beyond 2019 levels and generate long-term value for our owners in the years ahead. Our attention is now squarely on rebuilding our margins and repairing our balance sheet.”
COO Comments
Jet Blue COO Joanna Geraghty comment, “We are pleased to see further month-on-month improvement into the peak summer months, with demand momentum across all of our geographies. We ended the quarter with load factors in the mid-80s with June capacity largely back to pre-pandemic levels, compared to an average load factor in the mid-60s in the first quarter. For the third quarter of 2021, our planning assumption for revenue is a decline of between (4%) and (9%) year over two, another quarter of strong sequential improvement of approximately 20 points. We expect unit revenue to continue to improve on top of increasing capacity, with load factors in the mid-to-high 80s this summer. We have seen days with average load factors in the 90s. For the third quarter of 2021, our planning assumption is for capacity to be between flat to down (3%) year over two, given the strong sequential improvement in demand. Throughout the pandemic, we have been nimble in adjusting our capacity deployment to the prevailing demand environment. We’ll maintain this approach given the continued uncertainty on the course of the pandemic caused by variants.”
Q3 2021 Guidance
COO Geraghty provided rough guidance, “For the third quarter, we estimate our EBITDA will range between $75 and $175 million dollars, reflecting continued sequential improvement in demand partially offset by continued cost pressures from fuel prices, and airport rents and landing fees. We expect to remain in positive EBITDA territory through the end of the year and expect to generate pre-tax profits in July and August. We are committed to generating better than pre-pandemic earnings in the next few years by growing revenue and controlling costs, and we are confident that we are on the right path to expanding margins in a sustainable way. We are now squarely focused on repairing our balance sheet, lowering our total cost of debt, and growing our unencumbered asset base. We reduced our net debt by over 50% to under $1 billion dollars at the end of June. Both our net debt and the weighted average cost of debt now sit below pre-pandemic levels.”
JBLU Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the playing field for JBLU stock. The weekly rifle chart peaked twice off the $21.75 Fibonacci (fib) level. The weekly rifle chart downtrend has reversed and is attempting a breakout with a rising 5-period moving average (MA) at $15.56 with 15-period MA at $15.44 forming a solid base. The weekly stochastic has a mini pup rising at the 40-band. The weekly formed a market structure high (MSH) sell trigger when $18.31 broke down but is attempt a weekly market structure low (MSL) buy trigger on a breakout above $16.09. The weekly upper Bollinger Bands (BBs) sit at $20.27. The daily rifle chart is in a make or breaks as the uptrend stalls with a flat 5-period MA at $15.80 as the stochastic forms a mini inverse pup fall. The daily BBs are compressing as both envelopes slope inward indicating a compression preceding the range break. Prudent investors can use this period to watch for opportunistic pullback levels at the $14.90 fib, $14.15 fib, $13.28 fib, $12.39 fib, and the $11.29 fib level. Upside trajectories range from the $18.50 fib to the $22.98 fib level.
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