Recent airline earnings couldn’t have come at a more illustrative time in the markets. Pandemic fears have largely dwindled, making way for buyer-friendly optimism. This isn’t the case across numerous sectors currently; tech stocks have been crushed under inflation-led valuation worries, with sectors consistently underperforming as the world grapples with macro uncertainty leveraged by Fed interest announcements and the ongoing conflict in Ukraine.
For travel though, company’s are finally looking into what seems like the light at the end of a 2-3 year tunnel. JetBlue (NASDAQ: JBLU) released its Q122 earnings this morning, and although the company is still posting a loss, the post-covid recovery looks well underway.
The company reported a loss per share of $0.79 across Q1, compared to EPS of $0.14 in 2019. The first quarter also saw a GAAP pre-tax loss of $398M, compared to a pre-tax income of $58M in 2019. Whilst clearly some headway needs to be made across 2022 to reinstate growth, investors can’t expect much less given the climate of the last few years.
Thanks to demand that, as put by the company, “materialized beyond our expectations”; management was able to cut declining revenue expectations by 6 percentage points. Revenue declined 7.2% over year 3, falling in line with the guidance of between 6% and 9%; cut from 11% to 16%. The problematic hinge for airlines moving forward is soaring fuel prices. The realized fuel price in Q122 was $2.90 per gallon, a 41% increase from $2.05 in Q119 – overall, JetBlue expects this to rise to $3.79 by the second quarter.
Management appeared incredibly optimistic about the coming year, as summarized by JetBlue CEO Robin Hayes:
“Our first quarter results were characterized by a very strong demand acceleration, with revenue coming in more than six points ahead of our initial view in January. We delivered positive year-over-three revenue growth in the month of March as we exited the quarter with tremendous revenue momentum driven by very strong underlying travel demand across all of our core segments”
Looking at sentiment, the travel bounce should welcome buyers if macro concerns don’t become more volatile. Rising Covid cases in China could pose a worry; a fresh wave of lockdowns could easily be enough to throw travel stocks back into the red.
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