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
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