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Bear of the Day: JetBlue Airways (JBLU)

Zacks

It has been a summer to forget for the nation’s airlines, as poor weather and heavy competition have combined to push many names in the sector lower.

However, thanks to some positive news from Delta in recent sessions, the sector has been coming back with full force as of late. But with a nice run in airline stocks from this move recouping some of the recent losses, investors have to be wondering if the trend can continue or if a return to a sluggish environment is ahead.

Well, it is hard to say for all airlines, but the outlook certainly isn’t great for JetBlue Airways (JBLU).

Why JBLU?


JetBlue has benefited from the surge in optimism just like its peers, but its fundamental picture remains quite poor. This is especially evident if you look to recent earnings estimates for the stock.

For the current quarter, we have seen eight estimates go lower for earnings in the past month compared to zero higher, while we have seen a similar trend for the current year as well. And for both time frames, a double-digit percentage decline is projected for the change in EPS too.

The magnitude of the recent shift in the consensus is also pretty telling for JetBlue. The company’s consensus estimate has gone down by about 17.5% in the past two months, while the full year estimate has plunged by over 9% as well. The longer-term picture doesn’t get much better, as growth is expected to be positive, but those estimates have come down sharply in recent weeks too.

It also doesn’t help that JetBlue has a major area of operations at San Juan airport. This is the company’s focus city for the region, and the ongoing crunch in Puerto Rico seems likely to dent JetBlue’s profits, particularly since the island doesn’t look to get back to full strength any time soon. After all, JetBlue accounts for roughly a third of passengers at the airport, so it is likely to have a visible impact on operations.

Take all these factors together and it shouldn’t be a surprise that JBLU has a Zacks Rank #5 (Strong Sell) and why we are looking for a return to sluggish trading in this company in the near future.

Other Choices

Clearly, JetBlue is a choice to consider avoiding this fall in the airline space. But what are some better picks for investors in today’s climate?

Well, a good idea might be to consider transport companies outside of the airline space. Airlines actually have a bottom 15% industry rank, so there are plenty of better selections out there for investors.

One such name is in the truck industry, a space that has a top 20% rank right now. One to watch in particular could be Old Dominion Freight Line (ODFL), as it has a Zacks Rank #2 (buy) and a nice VGM score too. Add in double-digit growth projections for EPS and a positive Earnings ESP, and this could definitely be a way to play the transportation market right now, especially when compared to JetBlue.

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