Lumber Yak
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- Aug 28, 2002
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Found this on CBS Marketwatch today (Read Below).
Sounds great for the lucky Jet Blue pilots out there.... Also a pretty good discussion about Southwest in comparison below.
Check it out!
JetBlue soars on upgrade
By Susan Lerner, CBS.MarketWatch.com
Last Update: 4:14 PM ET Jan. 23, 2003
NEW YORK (CBS.MW) - William Greene is cautious on airlines but bullish on JetBlue.
Though his view of the industry reflects concerns that the revenue rebound has stalled, pricing is under pressure and balance sheets at the network carriers are fragile and deteriorating, the Morgan Stanley analyst said the discount carrier's fundamentals are the best in the business and upgraded its shares to "overweight" from "equal-weight" with a $33 12-month price target.
Following the call, JetBlue shares (JBLU: news, chart, profile) flew $1.75, or 6.4 percent, to close at $29.25.
"No other U.S. airline comes close to financials like these," said Greene, who expects JetBlue to post year-over-year revenue growth of nearly 100 percent in 2002, a 16 percent operating margin, 286 percent growth in operating income and 123 percent growth in pre-tax income.
For 2003, he is forecasting 50 percent revenue growth, 72 percent operating income growth, 44 percent earnings per share growth, 18.6 percent margins and 62 percent pre-tax income growth.
By way of comparison, Greene said Southwest Airlines, seen by many as the darling of the industry, saw its 2002 revenue decline 1 percent year over year, operating income fall 40 percent and margins decline 440 basis points. For 2003, Greene expects Southwest (LUV: news, chart, profile) to show revenue growth of 6 percent, a 20 percent rise in operating income and an operating margin of 7.8 percent. See related story.
Greene noted that his previous recommendation had been based on the stock's valuation but that given this growth outlook for the company he believes the recent share price weakness offers up an opportunity to get into the stock.
Also contributing to Greene's positive take on the company is the company's competitive position.
"We believe that customers primarily buy airline travel on the basis of price and that the rise of Internet distribution channels has exacerbated a downward price trend. In such an environment, the low-cost producer will win nearly every time," Greene said.
Financial difficulties are also leading to a diminished threat from the major airlines as any competitive response that the major airlines may have mounted in the past will be muted by their inability to weather further losses in the current environment.
"As JetBlue grows and gains scale and momentum in the marketplace, we believe the competitive threat posed by the majors will diminish further," he added.
Yet, despite its status as a low-cost carrier, Greene said JetBlue is still realizing average fares in key markets that are 30 to 40 percent higher than the competition because the competitors are finding it increasingly necessary to discount off JetBlue's offered price to fill the same number of seats as JetBlue.
Still, in the end, an airline is an airline and Greene acknowledged that many issues could arise beyond management's control to weigh on the stock including skyrocketing oil prices, a protracted war in the Middle East that could cause a sharp drop in travel demand and unionization.
He also sees the possibility of short-term weakness in the stock if the company misses fourth quarter estimates. Although Greene believes the airline will hit his 21 cents a share forecast, he noted that there were unanticipated costs in the quarter related to a snowstorm in New York City.
JetBlue is scheduled to report its numbers Jan. 30. The consensus estimate of analysts surveyed by Thomson First Call is for earnings of 20 cents a share for the period.
Susan Lerner is a reporter for CBS.MarketWatch.com.
Sounds great for the lucky Jet Blue pilots out there.... Also a pretty good discussion about Southwest in comparison below.
Check it out!
JetBlue soars on upgrade
By Susan Lerner, CBS.MarketWatch.com
Last Update: 4:14 PM ET Jan. 23, 2003
NEW YORK (CBS.MW) - William Greene is cautious on airlines but bullish on JetBlue.
Though his view of the industry reflects concerns that the revenue rebound has stalled, pricing is under pressure and balance sheets at the network carriers are fragile and deteriorating, the Morgan Stanley analyst said the discount carrier's fundamentals are the best in the business and upgraded its shares to "overweight" from "equal-weight" with a $33 12-month price target.
Following the call, JetBlue shares (JBLU: news, chart, profile) flew $1.75, or 6.4 percent, to close at $29.25.
"No other U.S. airline comes close to financials like these," said Greene, who expects JetBlue to post year-over-year revenue growth of nearly 100 percent in 2002, a 16 percent operating margin, 286 percent growth in operating income and 123 percent growth in pre-tax income.
For 2003, he is forecasting 50 percent revenue growth, 72 percent operating income growth, 44 percent earnings per share growth, 18.6 percent margins and 62 percent pre-tax income growth.
By way of comparison, Greene said Southwest Airlines, seen by many as the darling of the industry, saw its 2002 revenue decline 1 percent year over year, operating income fall 40 percent and margins decline 440 basis points. For 2003, Greene expects Southwest (LUV: news, chart, profile) to show revenue growth of 6 percent, a 20 percent rise in operating income and an operating margin of 7.8 percent. See related story.
Greene noted that his previous recommendation had been based on the stock's valuation but that given this growth outlook for the company he believes the recent share price weakness offers up an opportunity to get into the stock.
Also contributing to Greene's positive take on the company is the company's competitive position.
"We believe that customers primarily buy airline travel on the basis of price and that the rise of Internet distribution channels has exacerbated a downward price trend. In such an environment, the low-cost producer will win nearly every time," Greene said.
Financial difficulties are also leading to a diminished threat from the major airlines as any competitive response that the major airlines may have mounted in the past will be muted by their inability to weather further losses in the current environment.
"As JetBlue grows and gains scale and momentum in the marketplace, we believe the competitive threat posed by the majors will diminish further," he added.
Yet, despite its status as a low-cost carrier, Greene said JetBlue is still realizing average fares in key markets that are 30 to 40 percent higher than the competition because the competitors are finding it increasingly necessary to discount off JetBlue's offered price to fill the same number of seats as JetBlue.
Still, in the end, an airline is an airline and Greene acknowledged that many issues could arise beyond management's control to weigh on the stock including skyrocketing oil prices, a protracted war in the Middle East that could cause a sharp drop in travel demand and unionization.
He also sees the possibility of short-term weakness in the stock if the company misses fourth quarter estimates. Although Greene believes the airline will hit his 21 cents a share forecast, he noted that there were unanticipated costs in the quarter related to a snowstorm in New York City.
JetBlue is scheduled to report its numbers Jan. 30. The consensus estimate of analysts surveyed by Thomson First Call is for earnings of 20 cents a share for the period.
Susan Lerner is a reporter for CBS.MarketWatch.com.
