JetBlue Trims 1st Quarter Outlook

NEW YORK (AP) _ JetBlue Airways Corp. said Wednesday it expects a wider first-quarter loss and lower full-year profit, as it absorbs the effect of more than 1,000 cancellations caused by last week's

Wednesday, February 21st 2007, 7:54 pm

By: News On 6

NEW YORK (AP) _ JetBlue Airways Corp. said Wednesday it expects a wider first-quarter loss and lower full-year profit, as it absorbs the effect of more than 1,000 cancellations caused by last week's winter blast in the Northeast.

But shares of the low-cost carrier, which has battled withering criticism since operations melted down at its New York hub, still rose after Merrill Lynch said the stock had been oversold and recommended buying it.

JetBlue said it's now looking for first-quarter pretax margins of between negative 8 percent and negative 10 percent. It previously predicted pretax margins of negative 2 percent to negative 4 percent.

The revision equates to about a $37 million reduction in first-quarter results, Prudential Equity analyst Bob McAdoo wrote in a research report. A day earlier, JetBlue said the winter woes mean it will have to hand out as much as $30 million in refunds, credits, worker overtime and other expenses.

McAdoo said the guidance change seems extreme and wrote that JetBlue may be trying to lower expectations ``in hopes of buoying reactions to future earnings releases.''

He cut his first-quarter estimate to a loss of 12 cents from a loss of 4 cents. Analysts overall, on average, look for a first-quarter loss of 9 cents, according to a Thomson Financial survey.

Calyon Securities analyst Ray Neidl said in an interview that the updated guidance is in line with his expectations, after he trimmed his first-quarter outlook to a loss of 14 cents per share from a loss of 3 cents.

He kept his ``Add'' rating on the stock, saying fliers could forgive the company for a one-time meltdown. If no more snafus pop up, Neidl said consumer impressions of JetBlue may return to normal in the coming months.

JetBlue is implementing a new customer bill of rights that promises vouchers to certain fliers who experience delays, and it took out full-page advertisements in several East Coast newspapers on Wednesday to apologize for the travel headaches.

``We are sorry and embarrassed,'' the full-page ad began. ``But most of all, we are deeply sorry.''

Neidl expects JetBlue to report a full-year profit of 44 cents per share, down from a prior projection of 64 cents. Analysts overall are looking for 52 cents per share.

JetBlue expects full-year pretax margins of 3 percent to 5 percent, down from prior guidance of 5 percent to 7 percent.

Despite the lower guidance, JetBlue shares rose 29 cents, or 2.3 percent, to close at $13.19 on the Nasdaq Stock Market, after earlier climbing as high as $13.56. The stock has traded between $8.93 and $17.02 over the past year.

Merrill Lynch analyst Michael Linenberg upgraded JetBlue to ``Buy'' from ``Neutral,'' saying its sharp declines may be overdone.

In a research report, Linenberg said JetBlue is making progress on its financial plan to return to profitability, which calls for slower growth and cost efficiencies. JetBlue implemented the plan last year after high jet fuel prices helped erode profits.

After JetBlue stock fell close to a year-to-date low in recent sessions, Linenberg wrote that investors were not giving enough credit for JetBlue's fundamental improvements.

Also on Wednesday Standard & Poor's maintained its highly speculative rating on JetBlue's debt, saying the carrier has boosted its cash holdings and recently returned to industry leading margins.