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Delta Air Lines (DAL) Up on Q1 Earnings Beat, Upbeat View

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Delta Air Lines (DAL - Free Report) kick-started the first-quarter 2019 earnings season in the airline space on a solid note, delivering better-than-expected earnings and revenues. The company’s bottom line (excluding 13 cents from non-recurring items) of 96 cents per share outpaced the Zacks Consensus Estimate of 90 cents and increased substantially on a year-over-year basis. Higher revenues aided the quarterly results.

Operating revenues totaled $10.47 billion, which surpassed the Zacks Consensus Estimate of $10.38 billion. Moreover, it compared favorably with the year-ago number.

Moreover, the airline behemoth issued an encouraging projection. For the second quarter, Delta expects earnings (excluding special items) between $2.05 and $2.35 per share. The mid-point of the guided range ($2.20 per share) is above the Zacks Consensus Estimate of $2.14.

For 2019, Delta expects revenues to grow 5-7%, up from its prior projection. The uptick can be attributed to strong demand for air travel. Investors were pleased with the company’s outperformance and upbeat projections. As a result, the stock gained value in pre-market trading.

On an adjusted basis, total revenue per available seat mile (TRASM) in the first quarter increased 2.4% year over year to 16.7 cents. TRAM improvement was more than the guidance of 2% increase projected earlier in April 2019.

Delta Air Lines, Inc. Price, Consensus and EPS Surprise

 

Delta Air Lines, Inc. Price, Consensus and EPS Surprise | Delta Air Lines, Inc. Quote

Other Details

During the quarter under review, passenger revenues, which accounted for 88.4% of the top line, improved 6%. Meanwhile, cargo revenues declined 5%. However, other revenues increased 2%. The average fuel price (adjusted) in the first quarter was $2.05 per gallon, reflecting a 1.8% increase on a year-over-year basis.

Revenue passenger miles (a measure of air traffic) increased 4.8% to 51.6 billion. Capacity or available seat miles expanded 5% to 62.4 billion. Load factor (percentage of seats filled by passengers) declined 20 basis points to 82.7% as traffic growth lagged capacity expansion. Passenger revenue per available seat mile (PRASM) inched up 0.6% year over year to 14.83 cents.  Passenger mile yield improved 0.8% to 17.93 cents.

Total operating expenses, including special items, climbed 4% year over year to $9,452 million. Operating cost per available seat mile decreased 1.4% to 15.14 cents. Also, non-fuel unit costs declined 0.2% to 11.06 cents.

Liquidity, Dividend and Share Repurchase

Delta exited the quarter with $1,910 million in cash and cash equivalents. The company generated free cash flow of $760 million and adjusted operating cash flow of $2 billion in the first quarter.

Long-term debt and finance leases stood at $7.7 billion at the end of the reported quarter compared with $8.3 billion at the end of 2018. The company has managed to reduce its net debt significantly from the 2009 levels.

Delta returned $$1.6 to its shareholders through dividends ($233 million) and share buybacks ($1.3 billion) in the quarter under review. The company expedited share buybacks in the quarter, funded by a $1 billion short-term loan.

Guidance

For second-quarter 2019, the carrier anticipates pre-tax margin in the range of 14-16%. The estimated fuel price, including taxes, settled hedges and refinery impact, is expected in the band of $2.10-$2.20 per gallon. Total unit revenue, on an adjusted basis, is anticipated to increase 1.5-3.5% in the quarter.

Total adjusted revenues are expected to grow between 6% and 8% in the April-June period. System capacity is anticipated to be up approximately 4-4.5% on a year-over-year basis. Cost per available seat mile, excluding fuel and profit sharing, is projected to rise 1-2% in the second quarter.

For 2019, free cash flow is anticipated between $3 billion and $4 billion. Cost per available seat mile, excluding fuel and profit sharing, is expected to grow 1% in the same period.

Upcoming Releases

Investors interested in the Zacks Airline industry are keenly awaiting first-quarter 2019 earnings reports from key players like United Continental Holdings (UAL - Free Report) , JetBlue Airways (JBLU - Free Report) and Southwest Airlines (LUV - Free Report) on Apr 16, 23 and 25, respectively.

Zacks Rank

Delta carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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