The airline industry has been dealing with macroeconomic challenges, which are expected to persist in the near term. Therefore, fundamentally weak airline stocks JetBlue Airways Corporation (JBLU) and Spirit Airlines, Inc. (SAVE) might be best avoided.
Experts warn that the recent wave of aircraft delays and cancellations might last for a decade due to a shortfall of 32,000 pilots, mechanics, and air traffic controllers.
Pete Buttigieg, Transportation Secretary, said, “If you look at the delays, for example, that America experienced through last year in the summer 2022, a lot of that was driven by these companies not having the staff that they needed. This is not something that’s going to be worked out overnight. It took years to get this way.”
In addition, global air cargo demand decreased by 3.4%, according to the International Air Transport Association (IATA), due to the global inflation issue and a drop in manufacturing output.
Let’s delve deeper into the fundamentals of the featured stocks.
JetBlue Airways Corporation (JBLU)
JBLU is a travel company. It provides air transportation services across the United States, the Caribbean, Latin America, Canada and the United Kingdom. Its segments include Domestic, and Caribbean & Latin America. It operates five types of aircraft: Airbus A220, Airbus A320, Airbus A321, Airbus A321neo, and Embraer E190.
JBLU’s forward non-GAAP P/E multiple of 22.77% is 28.4% higher than the industry average of 17.73%. Its forward EV/EBIT multiple of 21.72 is 40.5% higher than the industry average of 15.46.
JBLU’s trailing-12-month net income margin of 0.27% is 95.6% lower than the industry average of 6.19%. Its trailing-12-month ROTA of 0.20% is 96.1% lower than the 5.08% industry average.
JBLU’s total current assets came in at $3.89 billion for the period that ended June 30, 2023, compared to $3.75 billion for the period that ended December 31, 2023. Its long-term debt and finance lease obligations came in at $3.49 billion, compared to $3.09 billion for the same period.
The consensus revenue estimate of $2.43 billion for the quarter ending September 2023 represents a 5.3% decrease year-over-year. Its EPS is expected to come in at negative $0.05 for the same period. JBLU’s shares have lost 29.6% over the past year to close the last trading session at $6.46.
JBLU’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JBLU has an F grade for Sentiment and a D for Stability. It is ranked #24 out of 28 stocks Airlines industry. Click here for the additional POWR Ratings for Value, Growth, Momentum and Quality for JBLU.
Spirit Airlines, Inc. (SAVE)
SAVE is an airline service provider that connects 85 destinations in 16 countries across the United States, Latin America, and the Caribbean. It sells tickets via its call centers, airport ticket counters, and several third parties, including online, traditional, and electronic global distribution channels.
SAVE’s forward EV/EBITDA multiple of 12.54% is 11.80% higher than the industry average of 11.22%.
SAVE’s trailing-12-month EBITDA margin of 4.23% is 68.95% lower than the industry average of 13.62%. Its trailing-12-month EBIT margin of 0.34% is 96.6% lower than the industry average of 9.75%.
SAVE’s total current assets came in at $1.77 billion for the period that ended June 30, 2023, compared to $1.99 billion for the period that ended December 31, 2023. Its total current liabilities came in at $1.69 billion, compared to $1.60 billion for the same period.
SAVE’s revenue is expected to decrease by 2.1% year-over-year to $1.32 billion for the quarter ending September 2023. Its EPS is expected to come in at negative $0.47 for the same period. The stock has lost 34% over the past year to close the last trading session at $15.79.
SAVE has an overall D rating, equating to a Sell in our POWR Ratings system. It has an F grade for Sentiment and a D grade for Quality. It is ranked #26 in the same industry.
Beyond what is stated above, we’ve also rated SAVE for Growth, Value, Momentum and Stability. Get all SAVE ratings here.
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JBLU shares were trading at $6.52 per share on Wednesday morning, up $0.06 (+0.93%). Year-to-date, JBLU has gained 0.62%, versus a 16.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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