Why Jetblue (JBLU) Was Upgraded

Tickers in this article: JBLU

NEW YORK (TheStreet) -- JetBlue was upgraded to "buy" from "hold" by Deutsche Bank Thursday.

The firm set a price target of $13 for the airline stock, up from the previous $9.

Analyst Michael Linenberg wrote that Deutsche Bank upgraded the company "to reflect our improved earnings outlook, attractive share price valuation, and our belief that the company's ROIC will exceed its WACC in 2014 for the first time in a decade. Furthermore, we expect to see the earnings momentum story of the past two years extend into 2014 and 2015 resulting in a projected 30% EPS CAGR over the 2012-2015 timeframe. Lastly, we see the potential for the company to unlock meaningful value via its wholly-owned LiveTV subsidiary which provides in-flight connectivity systems and services."

TheStreet Ratings team rates JETBLUE AIRWAYS CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate JETBLUE AIRWAYS CORP (JBLU) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, good cash flow from operations, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JETBLUE AIRWAYS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JETBLUE AIRWAYS CORP increased its bottom line by earning $0.39 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.39).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 14.0%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 219.60% to $163.00 million when compared to the same quarter last year. In addition, JETBLUE AIRWAYS CORP has also vastly surpassed the industry average cash flow growth rate of 46.68%.
  • Powered by its strong earnings growth of 50.00% and other important driving factors, this stock has surged by 47.09% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Airlines industry average, but is greater than that of the S&P 500. The net income increased by 57.8% when compared to the same quarter one year prior, rising from $45.00 million to $71.00 million.