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Next month, I’ll be making my 19th annual trip to Las Vegas. It will be a fun time at the pool, at the sports bar, on the golf course, at fine dining establishments, in the casino and finally all day in the sports book to watch, and bet on, 24 hours of football on Saturday and Sunday. Usually the trip consists of 10 to 15 of my long time friends who always want to come back year after year. Every once in a while, one of us waxes nostalgic about the very first trip to Vegas, when it was only 3 of us. He always says, “AAAAAAH the first trip was the best”!.
While I don’t remember an extreme amount about that first trip, the one thing I do remember was that another one of our friends happened to be the President of the one of the gaming companies in Vegas and he promised us Friday night dinner when we went out there at one of his restaurants (on him of course, not his company). We, the three of us, ate at a restaurant which is no longer there. The meal was fine, the conversation lively and it came time to order dessert.
“I’ll have a cappacino”
“I’ll have an espresso”
“AAAAAAAAAH…..do you have Johnnie Walker Bluuuuuuuuuuuuuuuu?”
I think at the time, a glass of the Blue was going for like $100 a pop. Hey what better way to say thanks to a friend than to soak him for a round of BLUUUUUUU. The good news is that the restaurant didn’t have it. They suggested Johnnie Walker Black, to which he responded - “AAAAAAAAAH, I polish my furniture with that”.
Since then, Johnnie Walker Blue has been a staple of the trip. A beverage to toast our long time friendship and celebrate our sports book victories.
All this pining for Blue got me thinking, and I decided to buy stock in JBLU. No…it’s not Johnnie Walker Blue, it’s Jet Blue – the airline.
Today I bought JBLU at 12.55. I will sell it in 4 to 6 weeks at 14.52. This is why I like Jet Blue:
First of all, you have to love the chart. The company has been posting magnificent earnings as the economy improves and people take to the skies:
The stock is up around 100% this year. While it’s existing PE is 26, its forward PE is only around 13. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and attractive valuation levels.
JetBlue Airways Corporation, a passenger carrier company, provides air transportation services in the United States, the Caribbean, and Latin America. As of December 31, 2013, it operated a fleet of 4 Airbus A321 aircraft, 130 Airbus A320 aircraft, and 60 EMBRAER 190 aircraft. The company also served 82 destinations in 25 states, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 15 countries in the Caribbean and Latin America. JetBlue Airways Corporation was founded in 1998 and is based in Long Island City, New York.
Airlines used to be a horrible business. They had limited information on passenger tendencies and they all responded to the same capital investment signals. The companies took a while to figure out
deregulation. They all rushed into the same markets. They built too many planes at the same time. They companies got loaded up with debt, started chasing the same passenger buck by slashing fares and cash flow was irregular, fuel prices were volatile, and competition was fierce. The only thing you could count on in the airline business was that someone would always try to start up a new one (Trump Air) and another one would be going bankrupt.
Now it’s all a little bit different. Slowly, very slowly, giant mergers have taken place in the airline business. Excess capacity was getting wrung out and planes are now always full. Passengers are getting hit with fees out the wazzoo. And voila, the airlines- including Jet Blue – are now consistently profitable. JetBlue generated revenues of $5.6 billion, earnings before interest, taxes, depreciation and amortization (Ebitda) of $755 million, and earnings-per-share of 55 cents in the 12 months ended June 30.
ANAL-ysts have also recently issued reports about the stock. Cowen and Company upgraded shares of from a “market perform” rating to an “outperform” rating and now have a $15.00 price target on the stock, up previously from $10.00. ANAL-ysts at Imperial Capital raised their price target on shares of JetBlue Airways from $10.00 to $20.00 and now have an “outperform” rating on the stock.
JBLU last issued its quarterly earnings data on Thursday, July 24th. The company reported $0.19 EPS for the quarter, meeting estimate of $0.19. The company had revenue of $1.50 billion for the quarter, compared to the consensus estimate of $1.51 billion. During the same quarter in the prior year, the company posted $0.11 earnings per share. ANAL-ysts expect that JetBlue Airways will post $0.69 EPS for the current fiscal year.
JBLU operating revenue has increased at a four-year compounded annual growth rate of 13.4%, driven primarily by the growth in passenger revenue. So what’s on tap? Next year, JetBlue will begin retrofitting 110 of its Airbus planes (which account for the vast majority of its capacity) with "Sharklet" winglets. These can reduce fuel burn by as much as 4%.
JetBlue also has 39 Airbus A321 aircraft on order between 2015 and 2017. Most of these will be configured with 190 seats (compared with 100 to 150 seats for most JetBlue planes today) and should consume at least 15% less fuel per seat than JetBlue's fleet average.
In June, it JetBlue introduced a premium cabin with lie-flat seats on flights from New York to Los Angeles, and the service will be extended to New York-to-San Francisco flights in October. Hey, if your company is fronting the bill, wouldn’t you rather sleep like Spridle on a 6 hour flight rather than having some shrieking kid kicking the back of your seat? These "Mint" seats will command much higher fares than coach tickets.
While its forward PE of 13.5 times earnings estimates looks decent, it looks AWESOME in light of the fact that it has a long-term earnings growth rate of 24%. The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 538.9% when compared to the same quarter one year prior, rising from $36.00 million to $230.00 million.
Passengers availing JetBlue Airways services will now have access to more flying options with the carrier’s latest decision to fly south to Jacksonville – a city with the highest population in the state of Florida. They are planning to add two daily non-stop flights to Jacksonville International airport (:JAX) from Ronald Reagan National Airport (DCA) on and from Dec 18, 2014. The launch will coincide with the carrier’s two new daily flights from DCA to Fort Myers (:RSW) and West Palm Beach (PBI) in Florida.
JBLU has registered steady traffic growth in July 2014. The carrier reported airline traffic – measured in revenue passenger miles or RPMs – of 3.67 million, up 4.3% year over year, representing the sixth consecutive month of traffic growth. Consolidated capacity (or available seat miles/ASMs) was also up 3.5% year over year at 4.16 billion. However, the load factor or percentage of seats filled by passengers was 88.3%, up 70 basis points.
In the first seven months of this year, JetBlue has generated RPMs of 21.97 billion (up 3.9% year over year) and ASMs of 25.97 billion (up 4.3%). JetBlue is the fifth largest passenger carrier in the U.S. based on revenue passenger miles. It’s not a rinky dink carrier.
JetBlue’s unique selling proposition is providing high-class services to its customers at an affordable price. It ranks first among low-cost carriers for the ninth consecutive year in J.D. Power’s customer satisfaction survey. JetBlue is also the first airline in the U.S. to offer family pooling where families and small groups can earn and share points under its frequent flyer program, True Blue. Also, JetBlue was recognized as the 2014 “Best Low Cost Airline – Americas” by airline ratings and was highly rated on safety and product offerings. People first started flying on JetBlue when it offered Tee Wee.
One of my most favorite first things I did when I got to Vegas was go to the Sports Book and get the betting sheet. It always had little diagrams of TV’s next to the games that would be shown on TV. Everyone likes betting the TV games.
Anyway, the other airlines soon copied JetBlue and now a lot of them offer DirectTV. Of course I always end up getting on the plane that has no Tee Wee. That’s why I am writing up this stock pick now…no Tee Wee on my airplane.
JetBlue caters to the niche market comprising customers that it defines as “underserved customers”—those looking for better features and benefits that aren’t provided by low-cost carriers and at a reasonable price that aren’t provided by network carriers. There are people who really believe that their flight experience is better on JetBlue. The company also presently believes that competitive fares and quality air travel need not be mutually exclusive. Although this current hedgehog is being contested, everyone who flies JetBlue knows it has comfortable leather seating and more legroom than most airlines offer. You get free and unlimited snacks and beverages.
In New York and Boston, JetBlue is the largest airline by domestic capacity. In Fort Lauderdale (where the Titans smashed the Hard Rock) JetBlue is the largest carrier by capacity at this airport, with 20% of passengers.
JetBlue has a high aircraft utilization of 11.9 hours per day, enabled by its point-to-point structure. In 2013, JetBlue’s load factor, 83.7%, was higher than Southwest Airlines’ (LUV), 80.1%, and American Airlines Group’s (AAL), 82.5%. Aircraft utilization is one of the important measures of operational efficiencies that low-cost airlines count on to lower unit costs. Higher utilization will result in lower fixed costs per unit, as the costs spread across more air trips and passengers and results in lower cost per available seat mile.
Since JBLU is primarily a point to point carrier, they have better aircraft utilization rates, resulting in lower operating costs. This allows JetBlue to generate more revenue per aircraft.
The key to this investment is that JetBlue is at a point of inflection in their revenue and earnings. It can be no more plainly seen than in the trend of these results in the last few years:
The 3rd quarter estimates from the ANAL-ysts is way too light. It’s painfully obvious from the data that the 3rd quarter is always JetBlue’s best quarter. If they come anything close to last quarter’s performance, this stock is going to pop like the cap off of a Johnnie Walker Blue bottle. Just look at the table again. How much more obvious is this? I’ll be laughing my ass off in the next two months as I hit my target.
Here’s what the boss had to say:
“Today, we are pleased to report record second quarter earnings and our seventeenth consecutive quarter of profitability," said Dave Barger, JetBlue's Chief Executive Officer. "We saw improved profitability across our network, reflecting the success of ongoing efforts to adapt our products and services to meet our customers' ever-changing needs. I would like to thank our 15,500 crewmembers for
"We improved margin performance while expanding our network, demonstrating the core strength of our business," said Robin Hayes, JetBlue's President. "We remain focused on providing a differentiated product and culture in high-value geography while maintaining competitive costs. We believe this focus will drive improved returns for our shareholders."
"We continued to strengthen the balance sheet by paying down debt while enhancing access to liquidity by increasing the number of unencumbered aircraft," said Mark Powers, JetBlue's Chief Financial Officer.
"We believe these actions will help us maintain a relatively flat invested capital base this year while growing assets, which we expect will help us meet our return on invested capital goal."
Pass the Blue. AAAAAAAAAAAAAAAAAH!
$$$MR. MARKET$$$
www.mrmarketishuge.com
While I don’t remember an extreme amount about that first trip, the one thing I do remember was that another one of our friends happened to be the President of the one of the gaming companies in Vegas and he promised us Friday night dinner when we went out there at one of his restaurants (on him of course, not his company). We, the three of us, ate at a restaurant which is no longer there. The meal was fine, the conversation lively and it came time to order dessert.
“I’ll have a cappacino”
“I’ll have an espresso”
“AAAAAAAAAH…..do you have Johnnie Walker Bluuuuuuuuuuuuuuuu?”
I think at the time, a glass of the Blue was going for like $100 a pop. Hey what better way to say thanks to a friend than to soak him for a round of BLUUUUUUU. The good news is that the restaurant didn’t have it. They suggested Johnnie Walker Black, to which he responded - “AAAAAAAAAH, I polish my furniture with that”.
Since then, Johnnie Walker Blue has been a staple of the trip. A beverage to toast our long time friendship and celebrate our sports book victories.
All this pining for Blue got me thinking, and I decided to buy stock in JBLU. No…it’s not Johnnie Walker Blue, it’s Jet Blue – the airline.
Today I bought JBLU at 12.55. I will sell it in 4 to 6 weeks at 14.52. This is why I like Jet Blue:
First of all, you have to love the chart. The company has been posting magnificent earnings as the economy improves and people take to the skies:
The stock is up around 100% this year. While it’s existing PE is 26, its forward PE is only around 13. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and attractive valuation levels.
JetBlue Airways Corporation, a passenger carrier company, provides air transportation services in the United States, the Caribbean, and Latin America. As of December 31, 2013, it operated a fleet of 4 Airbus A321 aircraft, 130 Airbus A320 aircraft, and 60 EMBRAER 190 aircraft. The company also served 82 destinations in 25 states, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 15 countries in the Caribbean and Latin America. JetBlue Airways Corporation was founded in 1998 and is based in Long Island City, New York.
Airlines used to be a horrible business. They had limited information on passenger tendencies and they all responded to the same capital investment signals. The companies took a while to figure out
deregulation. They all rushed into the same markets. They built too many planes at the same time. They companies got loaded up with debt, started chasing the same passenger buck by slashing fares and cash flow was irregular, fuel prices were volatile, and competition was fierce. The only thing you could count on in the airline business was that someone would always try to start up a new one (Trump Air) and another one would be going bankrupt.
Now it’s all a little bit different. Slowly, very slowly, giant mergers have taken place in the airline business. Excess capacity was getting wrung out and planes are now always full. Passengers are getting hit with fees out the wazzoo. And voila, the airlines- including Jet Blue – are now consistently profitable. JetBlue generated revenues of $5.6 billion, earnings before interest, taxes, depreciation and amortization (Ebitda) of $755 million, and earnings-per-share of 55 cents in the 12 months ended June 30.
ANAL-ysts have also recently issued reports about the stock. Cowen and Company upgraded shares of from a “market perform” rating to an “outperform” rating and now have a $15.00 price target on the stock, up previously from $10.00. ANAL-ysts at Imperial Capital raised their price target on shares of JetBlue Airways from $10.00 to $20.00 and now have an “outperform” rating on the stock.
JBLU last issued its quarterly earnings data on Thursday, July 24th. The company reported $0.19 EPS for the quarter, meeting estimate of $0.19. The company had revenue of $1.50 billion for the quarter, compared to the consensus estimate of $1.51 billion. During the same quarter in the prior year, the company posted $0.11 earnings per share. ANAL-ysts expect that JetBlue Airways will post $0.69 EPS for the current fiscal year.
JBLU operating revenue has increased at a four-year compounded annual growth rate of 13.4%, driven primarily by the growth in passenger revenue. So what’s on tap? Next year, JetBlue will begin retrofitting 110 of its Airbus planes (which account for the vast majority of its capacity) with "Sharklet" winglets. These can reduce fuel burn by as much as 4%.
JetBlue also has 39 Airbus A321 aircraft on order between 2015 and 2017. Most of these will be configured with 190 seats (compared with 100 to 150 seats for most JetBlue planes today) and should consume at least 15% less fuel per seat than JetBlue's fleet average.
In June, it JetBlue introduced a premium cabin with lie-flat seats on flights from New York to Los Angeles, and the service will be extended to New York-to-San Francisco flights in October. Hey, if your company is fronting the bill, wouldn’t you rather sleep like Spridle on a 6 hour flight rather than having some shrieking kid kicking the back of your seat? These "Mint" seats will command much higher fares than coach tickets.
While its forward PE of 13.5 times earnings estimates looks decent, it looks AWESOME in light of the fact that it has a long-term earnings growth rate of 24%. The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 538.9% when compared to the same quarter one year prior, rising from $36.00 million to $230.00 million.
Passengers availing JetBlue Airways services will now have access to more flying options with the carrier’s latest decision to fly south to Jacksonville – a city with the highest population in the state of Florida. They are planning to add two daily non-stop flights to Jacksonville International airport (:JAX) from Ronald Reagan National Airport (DCA) on and from Dec 18, 2014. The launch will coincide with the carrier’s two new daily flights from DCA to Fort Myers (:RSW) and West Palm Beach (PBI) in Florida.
JBLU has registered steady traffic growth in July 2014. The carrier reported airline traffic – measured in revenue passenger miles or RPMs – of 3.67 million, up 4.3% year over year, representing the sixth consecutive month of traffic growth. Consolidated capacity (or available seat miles/ASMs) was also up 3.5% year over year at 4.16 billion. However, the load factor or percentage of seats filled by passengers was 88.3%, up 70 basis points.
In the first seven months of this year, JetBlue has generated RPMs of 21.97 billion (up 3.9% year over year) and ASMs of 25.97 billion (up 4.3%). JetBlue is the fifth largest passenger carrier in the U.S. based on revenue passenger miles. It’s not a rinky dink carrier.
JetBlue’s unique selling proposition is providing high-class services to its customers at an affordable price. It ranks first among low-cost carriers for the ninth consecutive year in J.D. Power’s customer satisfaction survey. JetBlue is also the first airline in the U.S. to offer family pooling where families and small groups can earn and share points under its frequent flyer program, True Blue. Also, JetBlue was recognized as the 2014 “Best Low Cost Airline – Americas” by airline ratings and was highly rated on safety and product offerings. People first started flying on JetBlue when it offered Tee Wee.
One of my most favorite first things I did when I got to Vegas was go to the Sports Book and get the betting sheet. It always had little diagrams of TV’s next to the games that would be shown on TV. Everyone likes betting the TV games.
Anyway, the other airlines soon copied JetBlue and now a lot of them offer DirectTV. Of course I always end up getting on the plane that has no Tee Wee. That’s why I am writing up this stock pick now…no Tee Wee on my airplane.
JetBlue caters to the niche market comprising customers that it defines as “underserved customers”—those looking for better features and benefits that aren’t provided by low-cost carriers and at a reasonable price that aren’t provided by network carriers. There are people who really believe that their flight experience is better on JetBlue. The company also presently believes that competitive fares and quality air travel need not be mutually exclusive. Although this current hedgehog is being contested, everyone who flies JetBlue knows it has comfortable leather seating and more legroom than most airlines offer. You get free and unlimited snacks and beverages.
In New York and Boston, JetBlue is the largest airline by domestic capacity. In Fort Lauderdale (where the Titans smashed the Hard Rock) JetBlue is the largest carrier by capacity at this airport, with 20% of passengers.
JetBlue has a high aircraft utilization of 11.9 hours per day, enabled by its point-to-point structure. In 2013, JetBlue’s load factor, 83.7%, was higher than Southwest Airlines’ (LUV), 80.1%, and American Airlines Group’s (AAL), 82.5%. Aircraft utilization is one of the important measures of operational efficiencies that low-cost airlines count on to lower unit costs. Higher utilization will result in lower fixed costs per unit, as the costs spread across more air trips and passengers and results in lower cost per available seat mile.
Since JBLU is primarily a point to point carrier, they have better aircraft utilization rates, resulting in lower operating costs. This allows JetBlue to generate more revenue per aircraft.
The key to this investment is that JetBlue is at a point of inflection in their revenue and earnings. It can be no more plainly seen than in the trend of these results in the last few years:
| Revenue | |||||
| 1Q | 2Q | 3Q | 4Q | Year | |
| 2014 | 1,349 | 1,493 | |||
| 2013 | 1,299 | 1,335 | 1,442 | 1,365 | 5,441 |
| 2012 | 1,203 | 1,277 | 1,308 | 1,194 | 4,982 |
| 2011 | 1,012 | 1,151 | 1,195 | 1,146 | 4,504 |
| 2010 | 870 | 939 | 1,030 | 940 | 3,779 |
| 2009 | 793 | 807 | 854 | 832 | 3,286 |
| EPS | |||||
| 1Q | 2Q | 3Q | 4Q | Year | |
| 2014 | 0.01 | 0.19 | E 0.27 | E 0.19 | |
| 2013 | 0.05 | 0.11 | 0.21 | 0.14 | 0.51 |
| 2012 | 0.09 | 0.16 | 0.14 | - | 0.39 |
| 2011 | 0.01 | 0.08 | 0.11 | 0.08 | 0.28 |
| 2010 | (0.01) | 0.10 | 0.18 | 0.03 | 0.30 |
| 2009 | 0.05 | 0.07 | 0.05 | 0.04 | 0.21 |
Here’s what the boss had to say:
“Today, we are pleased to report record second quarter earnings and our seventeenth consecutive quarter of profitability," said Dave Barger, JetBlue's Chief Executive Officer. "We saw improved profitability across our network, reflecting the success of ongoing efforts to adapt our products and services to meet our customers' ever-changing needs. I would like to thank our 15,500 crewmembers for
"We improved margin performance while expanding our network, demonstrating the core strength of our business," said Robin Hayes, JetBlue's President. "We remain focused on providing a differentiated product and culture in high-value geography while maintaining competitive costs. We believe this focus will drive improved returns for our shareholders."
"We continued to strengthen the balance sheet by paying down debt while enhancing access to liquidity by increasing the number of unencumbered aircraft," said Mark Powers, JetBlue's Chief Financial Officer.
"We believe these actions will help us maintain a relatively flat invested capital base this year while growing assets, which we expect will help us meet our return on invested capital goal."
Pass the Blue. AAAAAAAAAAAAAAAAAH!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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