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JetBlue Airways (JBLU) Q2 Earnings: A Beat in the Cards?

JetBlue Airways Corporation JBLU is scheduled to report second-quarter 2017 results on Jul 25, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 4.17%. Also, it has an impressive earnings history, beating the Zacks Consensus Estimate in three of the last four quarters with an average beat of 2.76%.

Why a Likely Positive Surprise?

Our proven model shows that JetBlue is likely to beat on earnings this quarter as well on the back of its perfect combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at +5.46%. This is because the Most Accurate estimate is pegged at 58 cents per share, whereas the Zacks Consensus Estimate stands lower at 55 cents. This serves as a leading indicator of a likely positive earnings surprise.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: JetBlue currently carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

The combination of JetBlue’s Zacks Rank #2 and an ESP of +5.46% makes us reasonably confident of an earnings beat at the same time around.

What is Driving the Better-than-Expected Earnings?

The improved unit revenue scenario should aid JetBlue’s second-quarter results. The positive sentiment regarding the stock can be gauged from the 7.8% increase in the Zacks Consensus Estimate for the second quarter to 55 cents per share over the last seven days.In May 2017, the carrier issued a bullish view on revenue per available seat mile (RASM: a key measure of unit revenue) for the second quarter of 2017. The company expects RASM to grow in the band of 4–6%. Capacity in the second quarter is also expected to grow in the same range.

JetBlue’s expansion efforts are also appreciative. The company announced enhanced flight service between Fort Lauderdale-Hollywood International Airport and Mexico City International Airport (MEX) as well as between Orlando International Airport and MEX in May this year. JetBlue aims to increase flights to four daily roundtrips between Mexico City and the U.S. – two each on the Fort Lauderdale and Orlando routes.

The carrier’s efforts to reduce debt levels are also impressive. Additionally, its cost control measures will aid the second-quarter results. The airline entered into a deal with Goldman Sachs in Apr 2017 to implement an accelerated share buyback program. This is a further positive which is expected to drive the second-quarter results.

However, high labor costs are expected to hurt the bottom line in second-quarter 2017. Cost per available seat miles (CASM: excluding fuel) is anticipated to grow in the band of 4.5-6.5% in the quarter.

Other Stocks to Consider

Investors interested in the broader transportation sector may also consider American Airlines Group, Inc. AAL, Alaska Air Group, Inc. ALK and Canadian National Railway Company CNI, since our model shows that all these stocks possess the right combination of elements to post an earnings beat in their next releases.

American Airlines has an Earnings ESP of +2.19% and a Zacks Rank #1. The company is slated to release its second-quarter 2017 results on Jul 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alaska Air Group has anEarnings ESP of +0.40% and a Zacks Rank #2. The company will report its second-quarter 2017 financial numbers on Jul 26.

Canadian National Railway has anEarnings ESP of +2.02% and a Zacks Rank #2. The company will release its second-quarter 2017 earnings numbers on Jul 25.

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