May 14, 2007

Stocks: JetBlue benefits from new top team

JetBlue Airways Corp.’s surprise decision to replace founder and Chief Executive David Neeleman with Dave Barger, who had been president for nine years, bodes well for investors.

With the shares down nearly 25% since the ice storm debacle and a fresh team in control, now is a good time for investors to board JetBlue. “The move from the founding visionary to a more nuts-and-bolts management team is necessary to get the airline back on track,” Ray Neidl, airline analyst at Calyon Securities, wrote last week.

Mr. Neeleman—who will remain chairman—began a management overhaul earlier this year that eventually wound up with him losing his job as CEO.

In March, he hired a new chief operating officer, a former official with the Federal Aviation Administration. And in April, Mr. Neeleman tapped Delta Air Lines’ former head of operations at John F. Kennedy International Airport to run JetBlue’s operations there. A raft of seasoned marketing and planning executives were recruited. “We needed that expertise,” Mr. Barger says. The new CEO also insists that the company will be ready for summer. Atop priority will be ensuring that weather-related meltdowns “never, and I mean never, happen again,” he says.

Mr. Barger must find ways to fill his fleet of 124 planes, which fly to 52 cities. New code-sharing agreements with several foreign carriers are expected to be announced this summer in which they will direct their passengers to JetBlue for U.S. domestic flights. In addition, the new Open Skies agreement between the United States and the European Union will help by bringing more travelers to U.S. cities, especially New York. Analysts expect the company's revenue to rise 20% this year, to $2.9 billion. Per-share earnings are expected to hit 26 cents, versus last year’s loss of a penny a share.

That may prove challenging for JetBlue, which faces soaring jet fuel costs, and a decline in booking numbers industrywide. The carrier will also get a head-on rival in Delta, which has emerged from bankruptcy and is beefing up at JFK.

Stocks to watch

Two weekends ago, Spider-Man 3 smashed box-office records. Last week, Spidey’s bosses at comic book superpower Marvel Entertainment Inc. reported that first-quarter earnings nearly tripled. What did shareholders do? They headed for the exits. Turns out management believes that the best earnings gains this year are already behind Marvel. The shares slipped 9% to $27.40 last week, but they are still up by nearly a third in the past 12 months.

Last week, MasterCard Inc.’s stock widened its six-month gain to nearly 60%. The latest reason for the excitement: surging international transaction fees. But with the shares at triple their IPO price of a year ago—36 times projected 2007 earnings—mere plastic never looked so pricey. Reports of a possible new European rival only heightened that worry. Last week, the company’s stock rose 3.1% to $138.83.

People do the darnedest things when they’ve got money to burn—like fill up little powder-blue boxes with nifty baubles at Tiffany & Co. That’s why a series of record stock market closes have been mirrored in the überjeweler’s share price, which has soared 28% this year. The stock is also getting a boost from investor Nelson Peltz’s pressuring management to boost earnings. Next week, the company is expected to post a 16% rise in first-quarter profits. Tiffany’s stock rose 1.5% to $50.04 last week.

Shares of Foot Locker Inc. tumbled 10.1% to $21.63 last week after the athletic shoe retailer slashed its quarterly forecast, blaming markdowns and weaker-than-expected sales.

Barr Pharmaceuticals Inc. reported an 85% drop in its first-quarter profit, largely due to costs associated with its acquisition of generic drugmaker Pliva of Croatia. Adjusted earnings topped Wall Street forecasts and Barr’s sales surged 83% due to strong generic drug sales. The company’s shares rose 14.5% to $32.39 last week.


No comments: