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Delta (DAL) Stock Up Despite Q3 Earnings & Revenue Miss
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Delta AirLines’ (DAL - Free Report) third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. Escalated operating expenses induced the earnings miss.
Multiple flight cancellations and booking weakness due to Hurricane Ian also hurt results. Delta reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
Delta reported revenues of $13,975 million, which lagged the Zacks Consensus Estimate of $14,157.2 million. Driven by the high air-travel demand, total revenues increased more than 52% on a year-over-year basis.
The buoyant air-travel demand scenario is also evident from the total operating revenue increase of 11% from third-quarter 2019 (pre-coronavirus) levels. The uptick in air-travel demand in the United States can be gauged from the fact that 71.1% of third-quarter 2022 passenger revenues came from the domestic markets.
The fourth-quarter 2022 adjusted revenue guidance is also encouraging and expected to increase in the 5-9% band from the fourth-quarter 2019 actuals. Strong revenue growth and the upbeat guidance seemed to please investors. As a result, the DAL stock gained in pre-market trading despite reporting lower-than-expected earnings and revenues.
In the third quarter of 2022, passenger revenues, accounting for 82% of the total revenues, were flat with the levels recorded in the comparable quarter of 2019 at $11,464 million. International passenger revenues in the September quarter came in at 97% of the level recorded in third-quarter 2019.
This rosy scenario was owing to the 12% increase in transatlantic revenues. Transatlantic demand was driven by leisure destinations like Italy, Spain and Greece in addition to improving business demand. Management also stated that business bookings increased after Labor Day. Cargo revenues increased 27% from the third-quarter 2019 actuals. Other revenues increased to $2,271 million from $961 million three years ago.
Adjusted operating revenues (excluding third-party refinery sales) came in at $12.84 billion, up 3% from the third-quarter 2019 level despite a $35-million negative impact from Hurricane Ian.
Adjusted operating margin was 11.6%. This was the second successive quarter when DAL generated a double-digit operating margin since 2019. DAL remains on track to achieve its targets of more than $7 of adjusted earnings per share and $4 billion of free cash flow, set for 2024.
Delta Air Lines, Inc. Price, Consensus and EPS Surprise
Below we present all figures (in % terms) compared with the third-quarter 2019 results.
Revenue passenger miles (a measure of air traffic) tumbled 18% to 54,786 million. Capacity (measured in available seat miles) contracted 17% to 63,007 million. Load factor (percentage of seats filled by passengers) was down to 87% from 88% in the comparable quarter of 2019.
Passenger revenue per available seat mile (PRASM) increased 21% to 18.19 cents. Passenger mile yield increased to 20.93 cents from 17.07 cents in the third quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) increased 23% to 20.38 cents in the September quarter.
Total operating expenses, including special items, escalated 19% to $12,519 million. Aircraft fuel expenses and related taxes surged 48% to $3,318 million in the reported quarter. Fuel gallons consumed contracted 19% to $930 million. Average fuel price per gallon (adjusted) surged 80% to $3.53. Non-fuel unit cost increased 22.5% to 12.43 cents in the reported quarter, mainly due to 17% lower capacity.
The airline had liquidity worth $11.2 billion at the end of the September quarter (including $2.8 billion under undrawn revolving credit facilities). Delta, currently carrying a Zacks Rank #3 (Hold), had an adjusted debt of $20.5 billion.
Per Dan Janki, Delta's chief financial officer, "We repaid $1.8 billion of debt during the quarter, bringing year-to-date debt repayment to more than $4 billion. We remain committed to strengthening our balance sheet, targeting adjusted net debt of $15 billion and investment grade metrics by 2024."
Q4 Outlook
All numbers in percentage are compared with the fourth-quarter 2019 figures. For the fourth quarter of 2022, the carrier expects capacity to decline in the 8-9% band. Non-fuel unit costs are expected to increase 12-13% from the fourth-quarter 2019 actuals.
Total revenues (adjusted) are likely to be in the $12-$12.4 billion range, driven by the resurgence in corporate travel. Third-party refinery sales are expected in the $0.9 billion-$1 billion band.
Management also expects fuel price per gallon in the $3.35-$3.55 range. Adjusted net debt is likely to be $22.5 billion in the December quarter. Operating margin is expected in the 9-11% range.
Management also expects fuel price per gallon in the $3.45-$3.60 range. Management expects earnings per share in the $1-$1.25 range. The Zacks Consensus Estimate for fourth-quarter 2022 earnings is currently pegged at 90 cents per share.
ZTO Express is being aided by rapid growth in parcel volumes. ZTO anticipates parcel volumes in the range of 24.96-25.86 billion in 2022, indicating a rise of 12-16% from the year-ago reported figure. Its efforts to reward its shareholders are also encouraging.
The Zacks Consensus Estimate for ZTO Express’ 2022 earnings has been revised 4.4% upward in the past 60 days. Earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 29.1%.
Higher volumes owing to a better freight market environment bolster Forward Air’s top line. Thanks to growth in its operations, FWRD is committed to rewarding its shareholders with dividends and share buybacks. In February, FWRD’s board approved a 14% hike in its quarterly dividend payment, taking the total to 24 cents per share.
The Zacks Consensus Estimate for Forward Air’s 2022 earnings has been revised 3% upward in the past 60 days. FWRD’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 5.6%.
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Delta (DAL) Stock Up Despite Q3 Earnings & Revenue Miss
Delta Air Lines’ (DAL - Free Report) third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. Escalated operating expenses induced the earnings miss.
Multiple flight cancellations and booking weakness due to Hurricane Ian also hurt results. Delta reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
Delta reported revenues of $13,975 million, which lagged the Zacks Consensus Estimate of $14,157.2 million. Driven by the high air-travel demand, total revenues increased more than 52% on a year-over-year basis.
The buoyant air-travel demand scenario is also evident from the total operating revenue increase of 11% from third-quarter 2019 (pre-coronavirus) levels. The uptick in air-travel demand in the United States can be gauged from the fact that 71.1% of third-quarter 2022 passenger revenues came from the domestic markets.
The fourth-quarter 2022 adjusted revenue guidance is also encouraging and expected to increase in the 5-9% band from the fourth-quarter 2019 actuals. Strong revenue growth and the upbeat guidance seemed to please investors. As a result, the DAL stock gained in pre-market trading despite reporting lower-than-expected earnings and revenues.
In the third quarter of 2022, passenger revenues, accounting for 82% of the total revenues, were flat with the levels recorded in the comparable quarter of 2019 at $11,464 million. International passenger revenues in the September quarter came in at 97% of the level recorded in third-quarter 2019.
This rosy scenario was owing to the 12% increase in transatlantic revenues. Transatlantic demand was driven by leisure destinations like Italy, Spain and Greece in addition to improving business demand. Management also stated that business bookings increased after Labor Day. Cargo revenues increased 27% from the third-quarter 2019 actuals. Other revenues increased to $2,271 million from $961 million three years ago.
Adjusted operating revenues (excluding third-party refinery sales) came in at $12.84 billion, up 3% from the third-quarter 2019 level despite a $35-million negative impact from Hurricane Ian.
Adjusted operating margin was 11.6%. This was the second successive quarter when DAL generated a double-digit operating margin since 2019. DAL remains on track to achieve its targets of more than $7 of adjusted earnings per share and $4 billion of free cash flow, set for 2024.
Delta Air Lines, Inc. Price, Consensus and EPS Surprise
Delta Air Lines, Inc. price-consensus-eps-surprise-chart | Delta Air Lines, Inc. Quote
Other Financial Details of Q3
Below we present all figures (in % terms) compared with the third-quarter 2019 results.
Revenue passenger miles (a measure of air traffic) tumbled 18% to 54,786 million. Capacity (measured in available seat miles) contracted 17% to 63,007 million. Load factor (percentage of seats filled by passengers) was down to 87% from 88% in the comparable quarter of 2019.
Passenger revenue per available seat mile (PRASM) increased 21% to 18.19 cents. Passenger mile yield increased to 20.93 cents from 17.07 cents in the third quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) increased 23% to 20.38 cents in the September quarter.
Total operating expenses, including special items, escalated 19% to $12,519 million. Aircraft fuel expenses and related taxes surged 48% to $3,318 million in the reported quarter. Fuel gallons consumed contracted 19% to $930 million. Average fuel price per gallon (adjusted) surged 80% to $3.53. Non-fuel unit cost increased 22.5% to 12.43 cents in the reported quarter, mainly due to 17% lower capacity.
The airline had liquidity worth $11.2 billion at the end of the September quarter (including $2.8 billion under undrawn revolving credit facilities). Delta, currently carrying a Zacks Rank #3 (Hold), had an adjusted debt of $20.5 billion.
Per Dan Janki, Delta's chief financial officer, "We repaid $1.8 billion of debt during the quarter, bringing year-to-date debt repayment to more than $4 billion. We remain committed to strengthening our balance sheet, targeting adjusted net debt of $15 billion and investment grade metrics by 2024."
Q4 Outlook
All numbers in percentage are compared with the fourth-quarter 2019 figures. For the fourth quarter of 2022, the carrier expects capacity to decline in the 8-9% band. Non-fuel unit costs are expected to increase 12-13% from the fourth-quarter 2019 actuals.
Total revenues (adjusted) are likely to be in the $12-$12.4 billion range, driven by the resurgence in corporate travel. Third-party refinery sales are expected in the $0.9 billion-$1 billion band.
Management also expects fuel price per gallon in the $3.35-$3.55 range. Adjusted net debt is likely to be $22.5 billion in the December quarter. Operating margin is expected in the 9-11% range.
Management also expects fuel price per gallon in the $3.45-$3.60 range. Management expects earnings per share in the $1-$1.25 range. The Zacks Consensus Estimate for fourth-quarter 2022 earnings is currently pegged at 90 cents per share.
Key Picks
Some better-ranked stocks in the Zacks Transportation sector are ZTO Express (Cayman) (ZTO - Free Report) and Forward Air Corp. (FWRD - Free Report) , both currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ZTO Express is being aided by rapid growth in parcel volumes. ZTO anticipates parcel volumes in the range of 24.96-25.86 billion in 2022, indicating a rise of 12-16% from the year-ago reported figure. Its efforts to reward its shareholders are also encouraging.
The Zacks Consensus Estimate for ZTO Express’ 2022 earnings has been revised 4.4% upward in the past 60 days. Earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 29.1%.
Higher volumes owing to a better freight market environment bolster Forward Air’s top line. Thanks to growth in its operations, FWRD is committed to rewarding its shareholders with dividends and share buybacks. In February, FWRD’s board approved a 14% hike in its quarterly dividend payment, taking the total to 24 cents per share.
The Zacks Consensus Estimate for Forward Air’s 2022 earnings has been revised 3% upward in the past 60 days. FWRD’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 5.6%.