Clear Skies for Jet Blue

08/01/2003 12:00 am EST


Despite a cautious stance on the overall airline sector, JetBlue is the latest Stock of the Week pick from Standard & Poor’s The Outlook. The airline earns S&P's five-star rating, which is the group's highest recommendation, signifying those stocks with the greatest appreciation potential. Here’s their review.

"JetBlue Airways (JBLU NASDAQ) operates a low-fare, low-cost airline that flies point-to-point routes. It differentiates itself by flying new aircraft, by offering low fares, leather seats, free satellite TV at every seat, and preassigned seating, and by trying to provide high customer service and reliable performance. This strategy has been well received. Witness the 87.4% load factor (the percentage of available seats that are full) JetBlue reported in the second quarter of 2003, which we expect will be the best among US airlines.

"We believe JetBlue has the correct strategy in place to generate continued revenue and earnings growth, especially now that signs point to improved travel demand. Part of JetBlue's strategy is to find underserved niche markets where current offerings are limited and fares are high, enabling it to move in with lower fares to stimulate demand. It began flying on February 11, 2000, with two planes out of JFK Airport in New York City. As of July 24, it was flying 45 Airbus A320 planes in 22 markets and plans to add eight more by year-end and 13 in 2004. 

"We believe JetBlue is the fastest-growing and lowest-cost airline in the US and is best positioned to benefit from a strengthening revenue environment. At the same time, JetBlue has one of the industry's healthiest balance sheets. We expect revenues in 2003 to grow about 53%. We expect EPS to rise about 47% in 2003, to $1.25, from 85 cents in 2002. In 2004, we see 40% revenue growth and 36% EPS growth to $1.70. Our target of $60 implies potential appreciation of about 33% over the next 12 months, which we feel will materially outperform the S&P 500 over the same period."

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