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Prudential Raises JetBlue

It goes to overweight from underweight.
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(JBLU) - Get JetBlue Airways Corporation Report

revenue should improve as it better tailors routes and fares to existing demand, Prudential said in upgrading the shares by two notches Monday.

Prudential, which downgraded the stock to underweight in March, expressed optimism that the airline will make good on an initiative to find $70 million in profit enhancements through the rest of the year. Half will come from lower costs, the brokerage noted, and half from "better managed" seat and route allocation.

"Based on fares being offered today, the mix of traffic will be different this year," Prudential said. "When actual data

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are reported in each of the upcoming months, traffic and load factors may be down somewhat, but we would expect that average revenue per flight will be up -- in spite of likely substantial reduced numbers of people traveling as a result of the historic lowest fares not being offered."

Prudential, which doesn't do investment banking, doubled its price target on the shares to $14 and raised its per-share estimate for 2006 to earnings of 4 cents from a loss of 24 cents. It raised its investment rating to overweight.

"If our current revised earnings estimates hold true, and the near-term outlook turns to earnings rather than losses, we believe JetBlue shares will outperform most of our other airline names between now and this fall, and thus the upgrade."

JetBlue shares closed at $10.75 Friday, down about 6% since Prudential's March 9 downgrade.

"In the past 12 weeks JetBlue has openly discussed some of the issues that had concerned us and has seemingly addressed most of the short- and longer-term issues," Prudential said. "As such, we now believe the short-term outlook is likely improved and certainly the company has indicated that it is prepared to deal with the medium- to longer-term directional issues."