TSC Ratings' Updates: JetBlue

The following ratings changes were generated on Wednesday, March 4.

We've downgraded home furnishings retailer Ethan Allen Interiors(ETH Quote) from hold to sell, driven by its feeble growth in its earnings per share, weak operating cash flow, generally disappointing historical performance in the stock itself, generally weak debt management and disappointing return on equity.

The company has experienced a steep decline of 72.9% in earnings per share in the most recent quarter compared with the same quarter last year, and we anticipate its two-year trend of declining EPS to continue in the coming year. Net operating cash flow decreased significantly to -$2.4 million compared with the year-ago quarter, and return on equity also greatly decreased, a signal of major weakness within the corporation. Ethan Allen's debt-to-equity ratio of 0.5 is low but is higher than the industry average. Its low 0.6 quick ratio demonstrates weak liquidity.

Shares have tumbled 67.4% over the year, underperforming the S&P 500. In one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

We've downgraded JetBlue Airways(JBLU Quote) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, poor profit margins and weak operating cash flow.

Net income decreased from -$4 million in the year-ago quarter to -$57 million, significantly underperforming the S&P 500 and the airlines industry. JetBlue's 2.5 debt-to-equity ratio is very high, though it's lower than the industry average. Its quick ratio of 0.7 demonstrates its lack of ability to cover short-term liquidity needs. ROE decreased from the year-ago quarter, a clear sign of weakness. The 29.8% gross profit margin is lower than desirable, though it has increased form the same period last year. Net operating cash flow decreased significantly to -$126 million since the year-ago quarter.