Jet Blue's Q4 Pleases Street: Shares Ready for Takeoff

Jan.30.09 | About: JetBlue Airways (JBLU)

Wall Street rewarded Jet Blue (NASDAQ:JBLU), by tacking on a 7% gain to its stock price in early trading, despite an overall ugly market day. Investors appear to be giddy that the Airline was able to produce earnings and revenues exceeding Street estimates. JBLU generated earnings before taxes of $4 million versus a $3 million loss. This represents an impressive $7 million positive swing in the midst of one of the worst recessions on record, a remarkable feat to say the least. The company recorded a 10% rise in revenues to $811 million, surpassing estimates by more than $3 million.

One time charge: JBLU reported a one-time non-cash $53 million charge, to write down its auction rate securities, however its liquidity remains pristine with $819 million in cash and securities and minimal debt maturities in 2009. The company also paid down an impressive $700 million of its debt.

CEO very pleased: "While we are disappointed to report a loss, I am very proud of what JetBlue accomplished in 2008," said Dave Barger, JetBlue's CEO. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers."

Fuel prices: The company paid an average fuel price, including hedging costs, of $2.67 per gallon for its fourth quarter. JBLU expects its cost for fuel in the first quarter will drop a substantial 22% to $2.07, while averaging $1.99 for the balance of the year.

Guidance raised: JBLU ratcheted up its operating guidance to 12-14% and its pre-tax margin to 6-8%. The company also announced new routes to LAX, Jamaica and service between JFK and Sangster Airports.

Bottom line: This good earnings news will probably translate into a couple of Broker upgrades, as well as force some frightened shorts to cover. The 24 million share short position is large enough to spark a substantial short squeeze, which could run the price as high as the $8 level within the next two trading sessions.

Disclosure: Long JBLU