NEW YORK (TheStreet) -- Airline stocks rallied on the news AMR Corporation (AAMRQ) and US Airways' (LCC) proposed merger had been cleared for landing. The two airlines are required to divest 52 slot pairs at Washington Reagan National Airport and 17 slot pairs at New York LaGuardia Airport as part of the agreement, a major boon to airlines trying to gain a foothold on the East Coast.
The AMR-US Airways deal stalled after the U.S. Department of Justice leveled legislation on the grounds a merger would reduce competition, increase airfare prices and create a monopoly in the industry.
TheStreet Ratings team rates JetBlue Airways Corp as a Buy with a ratings score of B-. The team has this to say about its recommendation:
"We rate JetBlue Airways Corp (JBLU) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, good cash flow from operations, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- JetBlue Airways Corp reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JetBlue Airways Corp increased its bottom line by earning 39 cents a share vs. 28 cents a share in the prior year. This year, the market expects an improvement in earnings (49 cents vs. 39 cents).
- JBLU's revenue growth trails the industry average of 21.4%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has significantly increased by 219.6% to $163 million when compared to the same quarter last year. In addition, JetBlue Airways Corp has also vastly surpassed the industry average cash flow growth rate of 107.88%.
- Powered by its strong earnings growth of 50% and other important driving factors, this stock has surged by 44.14% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Airlines industry average, but is greater than that of the S&P 500. The net income increased by 57.8% when compared to the same quarter one year prior, rising from $45 million to $71 million.
- You can view the full analysis from the report here: JBLU Ratings Report