Deutsche Bank Raises Price Target On JetBlue

Deutsche Bank changed its forecast on JetBlue Airways Corp. JBLU Wednesday after attending the company’s analyst day.  The firm raised its price target from $13 to $17 and maintained a Buy rating.

Analyst Michael Linenberg noted that “JetBlue’s management unveiled a series of value-enhancing initiatives that they intend to implement over the next few years, which we think will be accretive to the company’s bottom-line and improve its ROIC.

“What we were pleasantly surprised to hear, however, was that those initiatives are expected to boost annual pretax profits by $450 mm, which is ~$100 mm greater than we originally anticipated.”

According to Linenberg, “$200 mm is expected from the introduction of fare families, $100 mm is expected from the company’s cabin refresh strategy, and $150 mm will be driven by ‘new and ongoing initiatives’.”

“JetBlue also disclosed its plan to grow capacity 6-8 percent in 2015. Given the anticipated evolution of JetBlue’s fleet, we expect increased gauge and higher seating density to be key contributors to its growth over the next few years; we find this to be a cost-effective/capital-efficient means to grow capacity,” according to the analyst report.

The firm raised its 2015 EPS estimate to $1.10 (vs. consensus of $1.01) from $0.90 “primarily to reflect the aforementioned value-enhancing initiatives JBLU is expected to roll out over the next three years.”

The $17 price target was based on a 15x P/E multiple.

JetBlue Airways Corp. recently traded at $13.36, up 0.84 percent