On Monday, when stocks in every major airline stock except for Virgin America (VA) rose, JetBlue led the pack. Shares gained 58 cents, or 3.2%, to close at $18.70.
Of the top nine airlines, only JetBlue and Alaska (ALK), up 13%, show double-digit gains. In general, domestically focused airlines are up, with the exception of Virgin America, while the big three global airlines all show single-digit declines.
"JetBlue is showing the best revenue trends in first quarter of all the airlines we cover," Wolfe Research analyst Hunter Keay wrote recently, after JetBlue's surprisingly good February traffic report, which was released after the market closed last Wednesday.
Raymond James analyst Savanthi Syth on Monday upgraded JetBlue shares to outperform from market perform, citing an improved revenue outlook.
Syth made the prevailing case for domestic carriers. "The healthy economic outlook and strong dollar should bode well for domestic operations of U.S. airlines," she wrote. "However, it will impact international point-of-sale demand, creating a headwind for U.S. legacy airlines."
In the traffic report released last week, JetBlue said it expects current quarter revenue per available seat mile, or PRASM, to grow 3% to 4%, generally surpassing competitors. The carrier also said it expects capacity to grow between 9% and 10%, down from prior guidance due to winter storms. If there is one thing Wall Street loves, it is reduced capacity growth. On March 12, the day following the traffic report, shares rose 5%.
In general, analysts have not been overly excited about JetBlue. (An exception is S&P Capital IQ analyst Jim Corridore, who has had a strong buy for the past year.) Keay has a peer perform on the shares, although following the traffic report he wrote that "pushback we hear from investors is that we aren't positive enough, particularly as JetBlue's results have been improving." An
Keay acknowledged that "the competitive landscape is easing for JBLU, with competitors (capacity) growing just 4% in 1Q, which is the third straight quarter of deceleration from the 7% peak in 2Q14, and early schedule data shows competitors growing just 3% in 2Q15."
As a result, JetBlue's single highly competitive market is transcon, and "JetBlue appears to be winning there," Keay said. He said Mint, JetBlue's upgraded transcon product, is "contributing to better results, to our initial surprise. Being largely domestic certainly helps, too."
Meanwhile, Stifel analyst Joseph DeNardi has a hold on the shares, while Cowen & Co. Helane Becker has a market perform. JPMorgan analyst Jamie Baker has a neutral.
DeNardi wrote last week that even though JetBlue's return on invested capital improved to 6.3% in 2014 from 5.3% in 2013, "it remains among the lowest in the industry." He said the initiatives JetBlue outlined at its recent investor day "provide meaningful upside over the next few years" although capital expenditures for aircraft and non-aircraft spending remain relatively high in the current year."
Meanwhile, Becker wrote that while investors who bid up the share price may have been impressed by the higher PRASM that resulted from less flying due to storms, she noted that the carrier didn't disclose the higher costs associated with flight cancellations. "The commentary appears quite uplifting," Becker wrote. "However, there are costs associated with flight cancellations (and) the company did not address their current cost outlook."
JetBlue shares have been rising ever since former CEO Dave Barger, under assault from Wall Street because the carrier provides too many customer amenities, announced in September that he would throw in the towel. Shares opened at $11.26 on Sept. 18, the day of Barger's announcement. They ended the year at $15.86, up 84%, the second-highest full-year gain for an airline after Southwest's (LUV) 125%.