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Delta Air Lines (DAL) Earnings Beat in Q1, Revenues Miss
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Delta Air Lines Inc.(DAL - Free Report) kick-started the first-quarter earnings season in the airline space with a mixed performance. While the company’s earnings beat estimates, revenues lagged expectations.
The Atlanta, GA-based carrier’s first-quarter earnings (excluding special items) of 77 cents per share beat the Zacks Consensus Estimate of 73 cents, which pleased investors. Consequently, shares of the company were up in pre-market trading.
However, the bottom line contracted 41.7% on a year-over-year basis due to higher costs. Operating revenues came in at $9,148 million, below the Zacks Consensus Estimate of $9,155.9 million. Revenues declined 1.1% from the year-ago figure. During the quarter, passenger revenues, cargo revenues and others declined 1%, 1.2% and 2%, respectively, on a year-over-year basis. Average fuel price (adjusted) was up 28.6% to $1.71 per gallon.
Operating Statistics
Revenue passenger miles (a measure of air traffic) increased marginally to 48 billion. Capacity or available seat miles contracted 0.5% to 57.9 billion. Load factor (percentage of seats filled by passengers) improved 80 basis points year over year to 82.9% as traffic expanded, while capacity contracted in the quarter. Passenger revenue per available seat mile (PRASM) dipped 0.5% year over year to 13.28 cents. Also, passenger mile yield declined 1.4% to 16.03 cents.
Operating Expenses
Total operating expenses, including special items, climbed 5% year over year to $8,095 million. Consolidated unit cost or cost per available seat mile (CASM), including profit sharing, increased 5.8%, mainly due to the recent labor deals inked by the company.
Liquidity
At the end of the first quarter, Delta had $1.9 billion in cash and cash equivalents and adjusted net debt of $8.8 billion. The carrier generated $0.7 billion of adjusted operating cash flow in the quarter (excluding the $1.5 billion pension contribution).
Dividend and Share Repurchase
Delta returned $349 million to its shareholders through dividends ($149 million) and share buybacks ($200 million) in the quarter under review. In fact, we are impressed with the company’s efforts to return greater value to its investors.
In May 2016, the company raised its quarterly cash dividend to over 20 cents per share or 81 cents per share annualized. This represented an increase of 50% over the previous quarterly payout of 13.5 cents per share or 54 cents per share annualized. Now only time will tell whether the carrier increases its dividend payout this year too.
Second-Quarter 2017 Guidance
For the second quarter of 2017, the carrier expects operating margin in the range of 17% to 19%. The estimated fuel price, including taxes and refinery impact, is projected to be in the range of $1.68 to $1.73 per gallon. Also, system capacity is expected to be flat to up 1% on a year-over- year basis. Moreover, Delta expects passenger unit revenue to increase in the band of 1% to 3% (on a year-over-year basis). Cost per Available Seat Mile, (including profit sharing) is also anticipated to increase in the band of 6% to 8% in the second quarter, mainly due to higher labor costs.
We note that labor deals are in vogue in the airline space. Not only Delta, but other players in the space like Southwest Airlines (LUV - Free Report) , United Continental Holdings (UAL - Free Report) and American Airlines Group (AAL - Free Report) too have signed deals with various labor groups over the past few months.
Delta Air Lines, Inc. Price, Consensus and EPS Surprise
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Delta Air Lines (DAL) Earnings Beat in Q1, Revenues Miss
Delta Air Lines Inc.(DAL - Free Report) kick-started the first-quarter earnings season in the airline space with a mixed performance. While the company’s earnings beat estimates, revenues lagged expectations.
The Atlanta, GA-based carrier’s first-quarter earnings (excluding special items) of 77 cents per share beat the Zacks Consensus Estimate of 73 cents, which pleased investors. Consequently, shares of the company were up in pre-market trading.
However, the bottom line contracted 41.7% on a year-over-year basis due to higher costs. Operating revenues came in at $9,148 million, below the Zacks Consensus Estimate of $9,155.9 million. Revenues declined 1.1% from the year-ago figure. During the quarter, passenger revenues, cargo revenues and others declined 1%, 1.2% and 2%, respectively, on a year-over-year basis. Average fuel price (adjusted) was up 28.6% to $1.71 per gallon.
Operating Statistics
Revenue passenger miles (a measure of air traffic) increased marginally to 48 billion. Capacity or available seat miles contracted 0.5% to 57.9 billion. Load factor (percentage of seats filled by passengers) improved 80 basis points year over year to 82.9% as traffic expanded, while capacity contracted in the quarter. Passenger revenue per available seat mile (PRASM) dipped 0.5% year over year to 13.28 cents. Also, passenger mile yield declined 1.4% to 16.03 cents.
Operating Expenses
Total operating expenses, including special items, climbed 5% year over year to $8,095 million. Consolidated unit cost or cost per available seat mile (CASM), including profit sharing, increased 5.8%, mainly due to the recent labor deals inked by the company.
Liquidity
At the end of the first quarter, Delta had $1.9 billion in cash and cash equivalents and adjusted net debt of $8.8 billion. The carrier generated $0.7 billion of adjusted operating cash flow in the quarter (excluding the $1.5 billion pension contribution).
Dividend and Share Repurchase
Delta returned $349 million to its shareholders through dividends ($149 million) and share buybacks ($200 million) in the quarter under review. In fact, we are impressed with the company’s efforts to return greater value to its investors.
In May 2016, the company raised its quarterly cash dividend to over 20 cents per share or 81 cents per share annualized. This represented an increase of 50% over the previous quarterly payout of 13.5 cents per share or 54 cents per share annualized. Now only time will tell whether the carrier increases its dividend payout this year too.
Second-Quarter 2017 Guidance
For the second quarter of 2017, the carrier expects operating margin in the range of 17% to 19%. The estimated fuel price, including taxes and refinery impact, is projected to be in the range of $1.68 to $1.73 per gallon. Also, system capacity is expected to be flat to up 1% on a year-over- year basis. Moreover, Delta expects passenger unit revenue to increase in the band of 1% to 3% (on a year-over-year basis). Cost per Available Seat Mile, (including profit sharing) is also anticipated to increase in the band of 6% to 8% in the second quarter, mainly due to higher labor costs.
We note that labor deals are in vogue in the airline space. Not only Delta, but other players in the space like Southwest Airlines (LUV - Free Report) , United Continental Holdings (UAL - Free Report) and American Airlines Group (AAL - Free Report) too have signed deals with various labor groups over the past few months.
Delta Air Lines, Inc. Price, Consensus and EPS Surprise
Delta Air Lines, Inc. Price, Consensus and EPS Surprise | Delta Air Lines, Inc. Quote
Zacks Rank
Currently, Delta has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public. Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>.