The Zacks Analyst Blog Highlights: JetBlue Airways, Delta Air Lines, United Continental Holdings, Southwest Airlines and Johnson & Johnson

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Jul 27, 2012, 09:30 ET

CHICAGO, July 27, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include JetBlue Airways Corporation (Nasdaq:JBLU), Delta Air Lines Inc. (NYSE:DAL), United Continental Holdings Inc. (NYSE:UAL), Southwest Airlines Co. (NYSE:LUV) and Johnson & Johnson (NYSE:JNJ).

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Here are highlights from Thursday's Analyst Blog:

JetBlue Beats EPS, Doubles Y/Y

One of the leading low-cost airlinesJetBlue Airways Corporation (Nasdaq:JBLU) reported second quarter 2012 adjusted earnings per share (EPS) of 16 cents, beating the Zacks Consensus Estimate by a penny. Earnings also doubled from the year-ago earnings.

The company delivered the best-ever earnings in the company's history on the back of strong demand from leisure and business travelers. The company's strategy of expanding its network footprint in two major growth regions, Boston and the Caribbean & Latin America is paying off well amid uncertain economic growth.

Revenue

Total revenue climbed 11% year over year to $1.277 billion but missed the Zacks Consensus Estimate of $1.287 billion. Airline traffic, measured in revenue passenger miles, grew 10.5% year over year. Capacity (or available seat miles) leaped 5.5% and load factor (percentage of seats filled with passengers) rose 380 basis points year over year to 85.3%.

Yield per passenger mile inched up 1.3% year over year in the second quarter. Passenger revenue per available seat miles (PRASM or unit revenue) improved 6.1% year over year while operating revenue per available seat mile grew 5.3%.

Operating Expenses $82 million

Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, grew 5.6% year over year. CASM, including fuel, rose 2.1% from the year-ago quarter.

Operating Income

Operating income shot up 51% year over year to $130 million. Operating margin improved 270 basis points to 10.2% from the year-ago quarter.

Liquidity

At the end of the second quarter, the company had $1.2 billion in unrestricted cash and short-term investments.

Guidance

The company expects CASM to increase 1–3% and 1–3% in the third quarter and fiscal 2012, respectively. Similarly, CASM excluding fuel would increase 4.6–6.5% and 2.5–4.5%, respectively, in the third quarter and fiscal 2012. Additionally, JetBlue expects most of this year's increase to stem from higher maintenance expenses and profit sharing expense.

Capacity is expected to increase in the range of 7–9% for the third quarter and 6.5–8.5% for 2012.

The estimated fuel price, including taxes and hedges, is approximately $3.13 per gallon for the third quarter and $3.18 for 2012. JetBlue has hedged approximately 27% of its projected fuel requirements for both the third quarter and fiscal 2012 using a combination of collars, crude call options and jet fuel swaps.

Our Take

We believe JetBlue continues to benefit from its low-cost structure and improving travel demand that bode well in the present economy. JetBlue's expansion of service into new and untapped markets in Boston and in the Caribbean remains encouraging. Further, growing partnerships, cost-control measures, ancillary revenue opportunities and robust liquidity profile are the long-term beneficiaries of the company's growth.

This healthy outlook is expected to overshadow the increase in maintenance expenses, fuel price volatility, competitive threats from larger peers like Delta Air Lines Inc. (NYSE:DAL), United Continental Holdings Inc. (NYSE:UAL) and Southwest Airlines Co. (NYSE:LUV) and the ongoing global economic instabilities that might limit the upside potential of the stock.

We currently have a long-term Outperform recommendation on JetBlue. For the short term, the stock retains a Zacks #2 (Buy) Rank.

Earnings Scorecard: Johnson & Johnson

Following the release of second quarter 2012 results, most of the analysts coveringJohnson & Johnson (NYSE:JNJ) have cut their earnings estimates for 2012. The revision in estimates mainly reflects the guidance provided by the company.

Agreement of Analysts

Estimate revisions for 2012 indicate a significant negative bias. 12 of the 16 analysts covering the stock have cut their estimates for 2012 following the release of second quarter results with no analyst moving in the opposite direction.

Meanwhile, the estimate revisions for 2013 also show a similar trend with 9 of the 19 analysts covering the stock cutting their estimates.

Over the last 7 days, there have been no estimate revisions for 2012. However, 1 analyst has cut their 2013 estimate with no movements in the opposite direction.

The downward revision in estimates reflects Johnson & Johnson's revised outlook for 2012. Following the release of second quarter results, Johnson & Johnson cut its earnings guidance and now expects earnings per share of $5.00 - $5.07 in 2012 (old guidance: $5.07 - $5.17 per share).

The guidance mainly reflects the negative impact of currency fluctuation, partially offset by the positive impact of the Synthes acquisition. The updated guidance was well below the pre-earnings Zacks Consensus Estimate of $5.14 per share.

Magnitude – Consensus Estimate Trend

With the significant negative bias in estimate revisions, estimates for both 2012 and 2013 have gone down by several cents. While 2012 estimates are down by 8 cents, 2013 estimates have been cut by 4 cents.

The Zacks Consensus Estimate for 2012 and 2013 now stands at $5.06 and $5.46 per share, respectively.

Neutral on Johnson & Johnson

We currently have a Neutral recommendation on Johnson & Johnson. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Even though we expect Johnson & Johnson to continue facing headwinds in the form of EU and Japan pricing pressure, negative currency fluctuation and manufacturing issues, we believe Johnson & Johnson's diversified business model, lack of cyclicality, strong financial position will continue helping Johnson & Johnson pave its way through tough situations.

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