Airline stocks across the board are benefiting from low expectations. So when JetBlue (NASDAQ:JBLU) delivered an earnings report that missed on the top and bottom lines, investors shrugged it off. In fact, JBLU stock was up over 5% in early trading after the earnings report.
So why is JBLU stock climbing? The primary reason is that the company is projecting less cash burn in May. But most people know that the needle won’t move on JetBlue or other airline stocks until revenue comes back. In the conference call following the earnings report, JetBlue COO Joanna Geraghty gave an optimistic forecast for travel in the second half of the year.
However, a closer look at Geraghty’s comments show that it really amounts to saying that they hope the fog will lift so they can see how consumers are responding. With that in mind, this news piece caught my eye.
On May 6, JetBlue launched a new program called JetBlue Healthcare Hero. As part of the program, JetBlue will honor 100,000 healthcare workers with roundtrip airfare for two. The vouchers will apply anywhere that JetBlue flies.
In the initial phase, the company is donating roundtrip certificates for 10,000 healthcare workers in the greater New York area. Specifically, the program is identifying workers at the Mount Sinai Health System that includes the company’s Manhattan, Brooklyn, Queens, and Long Island campuses.
Symbolism Can Still Be Important
I’m a sucker for a well-conceived marketing campaign. Travel will be a catalyst to any economic recovery. But one of the many unknowns as the economy reopens is how willing consumers will be to fly. And that’s why I think this program is intriguing.
Normally giving away your product is a technique reserved for startup companies. However, for a mature company, free always has a value and can sometimes look desperate. However, in this case, airlines may benefit from a startup mentality.
Without passengers, airlines will fail. History teaches us that there will be a core group of customers who will get on an airplane as soon as they can. And business travel will return, albeit on a more limited scale initially.
However, that core won’t be enough to bring the airlines back. Until air travel is seen as safe, revenue will remain elusive. In that regard, it would be a powerful message to have doctors, nurses, and other healthcare workers getting on planes.
Is it symbolism over substance? Maybe. Is it self-serving for JetBlue? Possibly. But if you’re an airline right now, you have to bet on yourself. Because as you take a closer look at the earnings report, you can see that simply delivering results that are less bad is not going to cut it.
Is JBLU Stock a Buy After Earnings?
So, what did the earnings report show? JetBlue reported an adjusted loss per share of 42 cents. Revenue came in at $1.59 billion. Both numbers were below the FactSet consensus estimates of a loss per share of 30 cents on revenue of $1.7 billion.
However, investors were acutely interested in the company’s forward guidance regarding future cash burn. In that regard, the airline delivered. JetBlue announced that it expected to reduce its daily cash burn to slightly below $10 million a day. That number excludes the $5 million a day the company is receiving from the CARES act through September.
As Thomas Niel reminded InvestorPlace readers, JetBlue has a leaner cost structure than some of its larger rivals. And JetBlue does not have exposure to the Boeing (NYSE:BA) 737 Max issues. As I wrote back in March, JetBlue CEO Robin Hayes has been surprisingly transparent in not only the depth of the company’s problems, but also in the company’s response.
All of that means that JetBlue may have less “bad” to work through as the airline returns to flight. And with the money it’s receiving from the CARES act, the stock is not likely to go to zero. For those reasons, I suggest JBLU stock is a buy for a patient investor who is committed to the stock for the long term.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.