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Delta Air Lines (DAL) Beats on Q4 Earnings, Warns of Q1 Loss
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Delta Air Lines’ (DAL - Free Report) fourth-quarter 2021 earnings (excluding 86 cents from non-recurring items) of 22 cents per share outpaced the Zacks Consensus Estimate of 15 cents. Results came against the year-ago quarter’s loss of $2.53 per share. Strong holiday travel demand and favorable pricing aided the December quarter’s results.
Delta’s revenues came in at $9,470 million, which not only beat the Zacks Consensus Estimate of $9,232.1 million but also soared in excess of 100% from the year-ago figure as people resorted to air travel during the holidays.
Despite the year-over-year improvement in air-travel demand (particularly for leisure) in the United States as more and more Americans get vaccinated, the overall picture remains bleak when compared to the fourth-quarter 2019 scenario, mainly due to the softness in business and international travel. Consequently, passenger revenues plunged 29% from the levels recorded in the comparable quarter of 2019 to $7,241 million.
The uptick in air-travel demand in the United States can be gauged from the fact that 82.2% of fourth-quarter 2021 passenger revenues came from the domestic markets.
Cargo revenues surged 63% to $304 million. This was the fifth consecutive quarter when cargo revenues increased from the comparable periods’ levels in 2019. Cargo revenues in the reported quarter were boosted by strong demand during the holidays and favorable yields. Revenues from other sources climbed 91% to $1,925 million. Total revenues in the December quarter declined 17% from the fourth-quarter 2019 level.
Adjusted operating revenues (which exclude third-party refinery sales) came in at $8.4 billion. This reflected a 74% recovery from the fourth-quarter 2019 level. Fourth-quarter 2021 capacity was 79% restored compared with the fourth-quarter 2019 level.
Other Financial Details of Q4
Below we present all comparisons (in % terms) with fourth-quarter 2019 (pre-coronavirus levels).
Revenue passenger miles (a measure of air traffic) tumbled 28% to 40,402 million. Capacity (measured in available seat miles) contracted 21% to 51,744 million. With the fall in traffic outpacing the capacity reduction, load factor (percentage of seats filled by passengers) was down to 78% from 86% in the comparable quarter of 2019.
Passenger revenue per available seat mile (PRASM) declined 11% to 13.99 cents. Passenger mile yield decreased to 17.92 cents from 18.29 cents in the fourth quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) deteriorated 6% to 16.29 cents in the December quarter.
Total operating expenses including special items declined 8% to $9,207 million. Aircraft fuel expenses and related taxes slumped 22% in the reported quarter. Fuel gallons consumed decreased 24% to $755 million. Average fuel price per gallon (adjusted) increased 6% to $2.10. Non-fuel unit cost increased 8% in the reported quarter.
The airline had liquidity worth $14.2 billion at the end of the December quarter (including cash and cash equivalents, short-term investments and undrawn revolving credit facilities). Delta, currently carrying a Zacks Rank #3 (Hold), had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion. Operating cash flow during the quarter was $555 million. Free cash flow for the reported quarter was a negative $441 million.
Update on Omicron Impact
Due to the highly transmissible omicron variant of COVID-19, Delta like other U.S. carriers was forced to cancel multiple flights with many crew members falling ill. This, in turn, impacted air travel. Due to the operational disruptions, DAL expects to incur loss in first-quarter 2022.
Per Delta president Glen Hauenstein, "The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President's Day weekend forward. Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter."
Delta’s CEO Ed Bastian sounded hopeful when he said that “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel." Dan Janki, Delta's chief financial officer sounded confident of the carrier posting profit in the other three quarters of 2022, “resulting in a meaningful profit in 2022”.
Other Aspects of Q1 Outlook
All comparisons in percentage are made with first-quarter 2019. For the first quarter of 2022, the carrier expects to operate at a capacity that is in the 83-85% range of first-quarter 2019 levels. Non-fuel unit costs are expected to increase roughly 15% from the first-quarter 2019 actuals. Fuel price per gallon is expected in the $2.35-$2.50 range. Capital expenditures and adjusted net debt are likely to be $1.6 billion and $22 billion, respectively, in the March quarter.
Stocks to Consider
Below we present some better-ranked stocks in the broader Transportation sector:
Expeditors International of Washington (EXPD - Free Report) currently sports a Zacks Rank #1 (Strong Buy). EXPD is being bolstered by upbeat airfreight revenues. Like the first three quarters of 2021, we expect airfreight revenues to aid Expeditors’ fourth-quarter 2021 results (scheduled to be out on Feb 22, 2022) as well.
Shares of Expeditors have surged 32.2% in a year’s time. In May 2021, EXPD announced an 11.5% hike in its semi-annual cash dividend, taking the total to 58 cents per share. EXPD has an impressive record with respect to utilizing its shareholders’ money. The optimism surrounding the stock is evident from the 7.3% northbound revision of the Zacks Consensus Estimate for current-year earnings over the past 60 days.
ArcBest Corporation (ARCB - Free Report) currently carries a Zacks Rank #2 (Buy). ARCB has a stellar surprise history. Its earnings outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 27.4%.
Shares of ArcBest have surged 99.2% in a year’s time. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB.
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Delta Air Lines (DAL) Beats on Q4 Earnings, Warns of Q1 Loss
Delta Air Lines’ (DAL - Free Report) fourth-quarter 2021 earnings (excluding 86 cents from non-recurring items) of 22 cents per share outpaced the Zacks Consensus Estimate of 15 cents. Results came against the year-ago quarter’s loss of $2.53 per share. Strong holiday travel demand and favorable pricing aided the December quarter’s results.
Delta’s revenues came in at $9,470 million, which not only beat the Zacks Consensus Estimate of $9,232.1 million but also soared in excess of 100% from the year-ago figure as people resorted to air travel during the holidays.
Despite the year-over-year improvement in air-travel demand (particularly for leisure) in the United States as more and more Americans get vaccinated, the overall picture remains bleak when compared to the fourth-quarter 2019 scenario, mainly due to the softness in business and international travel. Consequently, passenger revenues plunged 29% from the levels recorded in the comparable quarter of 2019 to $7,241 million.
The uptick in air-travel demand in the United States can be gauged from the fact that 82.2% of fourth-quarter 2021 passenger revenues came from the domestic markets.
Cargo revenues surged 63% to $304 million. This was the fifth consecutive quarter when cargo revenues increased from the comparable periods’ levels in 2019. Cargo revenues in the reported quarter were boosted by strong demand during the holidays and favorable yields. Revenues from other sources climbed 91% to $1,925 million. Total revenues in the December quarter declined 17% from the fourth-quarter 2019 level.
Adjusted operating revenues (which exclude third-party refinery sales) came in at $8.4 billion. This reflected a 74% recovery from the fourth-quarter 2019 level. Fourth-quarter 2021 capacity was 79% restored compared with the fourth-quarter 2019 level.
Other Financial Details of Q4
Below we present all comparisons (in % terms) with fourth-quarter 2019 (pre-coronavirus levels).
Revenue passenger miles (a measure of air traffic) tumbled 28% to 40,402 million. Capacity (measured in available seat miles) contracted 21% to 51,744 million. With the fall in traffic outpacing the capacity reduction, load factor (percentage of seats filled by passengers) was down to 78% from 86% in the comparable quarter of 2019.
Passenger revenue per available seat mile (PRASM) declined 11% to 13.99 cents. Passenger mile yield decreased to 17.92 cents from 18.29 cents in the fourth quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) deteriorated 6% to 16.29 cents in the December quarter.
Total operating expenses including special items declined 8% to $9,207 million. Aircraft fuel expenses and related taxes slumped 22% in the reported quarter. Fuel gallons consumed decreased 24% to $755 million. Average fuel price per gallon (adjusted) increased 6% to $2.10. Non-fuel unit cost increased 8% in the reported quarter.
The airline had liquidity worth $14.2 billion at the end of the December quarter (including cash and cash equivalents, short-term investments and undrawn revolving credit facilities). Delta, currently carrying a Zacks Rank #3 (Hold), had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion. Operating cash flow during the quarter was $555 million. Free cash flow for the reported quarter was a negative $441 million.
Update on Omicron Impact
Due to the highly transmissible omicron variant of COVID-19, Delta like other U.S. carriers was forced to cancel multiple flights with many crew members falling ill. This, in turn, impacted air travel. Due to the operational disruptions, DAL expects to incur loss in first-quarter 2022.
Per Delta president Glen Hauenstein, "The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President's Day weekend forward. Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter."
Delta’s CEO Ed Bastian sounded hopeful when he said that “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel." Dan Janki, Delta's chief financial officer sounded confident of the carrier posting profit in the other three quarters of 2022, “resulting in a meaningful profit in 2022”.
Other Aspects of Q1 Outlook
All comparisons in percentage are made with first-quarter 2019. For the first quarter of 2022, the carrier expects to operate at a capacity that is in the 83-85% range of first-quarter 2019 levels. Non-fuel unit costs are expected to increase roughly 15% from the first-quarter 2019 actuals. Fuel price per gallon is expected in the $2.35-$2.50 range. Capital expenditures and adjusted net debt are likely to be $1.6 billion and $22 billion, respectively, in the March quarter.
Stocks to Consider
Below we present some better-ranked stocks in the broader Transportation sector:
Expeditors International of Washington (EXPD - Free Report) currently sports a Zacks Rank #1 (Strong Buy). EXPD is being bolstered by upbeat airfreight revenues. Like the first three quarters of 2021, we expect airfreight revenues to aid Expeditors’ fourth-quarter 2021 results (scheduled to be out on Feb 22, 2022) as well.
Shares of Expeditors have surged 32.2% in a year’s time. In May 2021, EXPD announced an 11.5% hike in its semi-annual cash dividend, taking the total to 58 cents per share. EXPD has an impressive record with respect to utilizing its shareholders’ money. The optimism surrounding the stock is evident from the 7.3% northbound revision of the Zacks Consensus Estimate for current-year earnings over the past 60 days.
You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcBest Corporation (ARCB - Free Report) currently carries a Zacks Rank #2 (Buy). ARCB has a stellar surprise history. Its earnings outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 27.4%.
Shares of ArcBest have surged 99.2% in a year’s time. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB.