JetBlue Reports Earnings Soon. What to Expect.

Either earnings or the trial could jump-start JetBlue (ticker: JBLU) stock, which is off 56% since its July peak and 36% for the year, as of Friday’s close.

Any boost, though, may be more likely to eventually come from the trial than from its earnings, though it’s hard to be too optimistic about either.

In its lawsuit, the government opposes the merger on the grounds that it would hurt competition. Prices would increase and travelers would have fewer choices for routes nationwide, according to the Justice Department.  

JetBlue disagrees and has tried to ease the government’s concerns, including voluntary agreements to divest Spirit holdings in Boston, Newark and at New York’s LaGuardia Airport if the deal is allowed to go through.

In a separate case, JetBlue was ordered to end its alliance with American Airlines (AAL) in the Northeast. The company opted not to appeal the decision, essentially in a bid to save the Spirit merger. The alliance formed a key part of the government’s complaint about the proposed Spirit deal.

Still, the Justice Department is pressing ahead with its Spirit case despite termination of the alliance and JetBlue’s voluntary divestiture agreements.

JetBlue told Barron’s it is ready to present its side. Spirit didn’t respond to a request for comment.

“We look forward to presenting our case in court as we strongly believe our combination with Spirit is the best opportunity to disrupt the industry by increasing competition and choice, creating a long overdue national low-fare challengers to the dominant Big Four airlines,” a JetBlue spokesperson said in an email.

The outcome looks to be a close-run thing. Raymond James analysts put the deal’s chances of succeeding at greater than half and Deutsche Bank analysts are forecasting a 60% chance, they said in a note after Spirit’s earnings last week.

However, Spirit’s disappointing earnings and guidance makes TD Cowen analyst Helane Becker think that it’s “possible thatJetBlue tries to renegotiate the price, especially if they win their case against the DOJ.”

J.P. Morgan analyst Jamie Baker has an Underweight rating on JetBlue stock but said sooner-than-expected clarity on the acquisition was an upside risk.

But with the trial expected to last 20 days and a decision unlikely for another few months, JetBlue’s third-quarter earnings might be the catalyst for the stock.  

Analysts are expecting JetBlue to post an adjusted loss of 25 cents a share, down from a profit of 21 cents a share in the same period last year. Revenue is expected to be $2.4 billion, according to analysts surveyed by FactSet, below the $2.6 billion in 2022’s third quarter.

Guidance for the current quarter will be of more interest to investors, but with its peers all flagging higher fuel costs, it’s tough to see JetBlue’s outlook sparking a big move higher for the stock.

Discount airlines have come under pressure in the past few months, with the summer vacation season over and fuel prices rising.

Figuring in the antitrust lawsuit, the termination of the Northeast alliance, and the slowdown in domestic demand, it’s easy to see why JetBlue stock has struggled in 2023.

Write to Callum Keown at [email protected]