Why JetBlue shares are falling today

What happened

Jet Blue Airways (JBLU -7.08% ) released Tuesday morning third-quarter results that beat expectations. But investors were unimpressed, sending shares down more than 5% on a gloomy outlook for the quarters ahead.

So what

We knew at the start of earnings season that Airlines companies would result in massive losses as the COVID-19 pandemic weighed heavily on travel demand. On Tuesday, JetBlue said it lost $1.75 per share on revenue of $492 million, which was actually considerably better than the loss of $2 per share on revenue of $457 million. dollars that was expected.

Image source: JetBlue Airways.

Revenue was down 76% year-over-year, though that was better than the 80% drop the company had initially feared. Post-earnings call officials said they saw a “modest sequential improvement” in August and September as the number of new COVID-19 cases fell and quarantine restrictions were eased.

JetBlue spent about $6.1 million per day in the third quarter, but expects that number to drop slightly to between $4 million and $6 million per day in the fourth quarter. The airline ended the quarter with approximately $3.1 billion in unrestricted cash and is exploring options to raise more than $2 billion in additional cash.

But investors were apparently spooked by a flood of reports this week suggesting a second wave of the pandemic could be at hand, which could wipe out those modest gains JetBlue had seen. Company officials on the call admitted that a vaccine is not a panacea, with CEO Robin Hayes telling investors that although JetBlue has not yet seen an impact from the increased number of cases ” it can change very quickly.”

Now what

JetBlue expects fourth quarter capacity to be down 45% year over year, with revenue down 65% and expenses down 30%. Although the results weren’t great, we knew they weren’t going to be great, and the market reaction appears to be out of proportion to the quarter.

JetBlue is putting the brakes on its growth plans to help it survive the crisis, reworking its orders with Airbus. The company now plans to take delivery of 15 planes in 2021 and 11 in 2022, down six planes in two years. This likely means slower growth and could put JetBlue’s long-awaited expansion into Europe on hold.

The airline’s shares are down 36% for the year, and given the outlook, I have no desire to buy just yet. But little has changed regarding JetBlue’s outlook after the earnings call, and the selloff seems overdone.

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