JetBlue Airways fell Tuesday as the low-cost airline's third-quarter earnings missed expectations.
The company (ticker: JBLU) reported adjusted earnings per share of 21 cents in the third quarter, below analysts' consensus of 24 cents. Revenue of $2.56 billion narrowly beat estimates.
It's the company's first quarterly adjusted profit since the start of the pandemic, which Chief Financial Officer Ursula Hurley said was an "important milestone."
Strong travel demand helped JetBlue to post that profit, despite rising costs. Total operating expenses jumped to $2.4 billion in the quarter, a 36% increase on the year-ago period, driven by higher fuel costs. The airline's operating margin fell to 5.4% from 9.4% as a result.
Chief Operating Officer Joanna Geraghty said that the strength of bookings for leisure travel and for those visiting friends and family carried through the peak summer period and into the fall. "We're confident in the demand backdrop for the year-end holiday peaks," she said in a statement .
The company expects revenue per available seat mile (RASM) to increase 15% to 19% on 2019 levels in the final three months of the year. By comparison RASM in the third quarter was 23.4% higher than the third quarter of 2019.
Capacity in the fourth quarter is expected to be 1% to 4% higher than 2019 levels, which Geraghty described as a "modest sequential step-up" from the third quarter.
The stock fell 7% in Tuesday morning trading and has now fallen more than 50% so far in 2022.
However, Cowen analyst Helane Becker said the earnings miss was primarily driven by increased costs related to Hurricane Ian and that guidance for the fourth quarter "looks positive."
"JetBlue's December quarter guidance leans positive, with capacity coming in lower than expectations but RASM growth outperforming," she said in a note. The guidance implies strong demand from leisure travelers and those visiting friends and family, she said, adding that if these trends hold for other carrier it could signal positive read-through for ultra low-cost carrier performance in the fourth quarter.
Becker has an Outperform rating on the stock with a target price of $10, implying 33% upside to Monday's closing price.
Three of the country's four largest airlines — Delta Air Lines (DAL), United Airlines (UAL) and American Airlines (AAL) — have all reported, with Southwest Airlines (LUV) due to release earnings Thursday. JetBlue's proposed merger with Spirit Airlines (SAVE), approved by Spirit shareholders last week, would make the combined low-cost carrier the country's fifth-largest airline.
Delta got things off to a flying start, issuing upbeat guidance as business and international travel roared back to life in the third quarter. American and United were equally as optimistic when it came to the demand outlook.