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Delta Air Lines (DAL - Free Report) kick-started the second-quarter 2023 earnings season for airlines on a bright note. The airline behemoth reported better-than-expected revenues and earnings per share driven by strong air travel demand.
Delta’s second-quarter 2023 earnings (excluding 16 cents from non-recurring items) of $2.68 per share comfortably beat the Zacks Consensus Estimate of earnings per share of $2.42. DAL reported earnings of $1.44 per share a year ago, dull in comparison to the current scenario, as air travel demand was not so buoyant then.
Revenues of $15,578 million beat the Zacks Consensus Estimate of $14,991.6 million. Total revenues increased 12.69% on a year-over-year basis driven by higher air travel demand.
Passenger revenues, accounting for 84.8% of total revenues, increased 21% year over year to $13,205 million and also beat our estimate of $11,570.7 million. Domestic markets contributed 67.7% to the total passenger revenues. Domestic passenger revenues in the June quarter increased 8% year over year. Passenger revenues also improved on the international front.
Cargo revenues declined 37% year over year to $172 million. The figure was also much lower than our estimate of $273.5 million. Other revenues decreased to $2,201 million from $2,594 million a year ago. The figure was also lower than our estimate of $2,535.6 million. Adjusted operating revenues (excluding third-party refinery sales) came in at $14,613 million, up 19% year over year.
Driven by the earnings and revenue beat, shares of Delta gained in the pre-market trading. Apart from that, management raised its earnings per share outlook for the current year, which found favor with investors. The company now expects 2023 earnings (on an adjusted basis) in the band of $6-$7 per share (earlier view was $6 per share). The Zacks Consensus Estimate of adjusted earnings of $6.21 per share is below the mid-point ($6.50) of the guided range. Free cash flow for the current year is still expected to be $3 billion.
Other Aspects of the Q2 Earnings Report
The adjusted operating margin was 17.1%. The company had reported an operating margin of 11.7% on an adjusted basis a year ago.
Below we present all figures (in % terms) in comparison with the second-quarter 2022 results.
Revenue passenger miles (a measure of air traffic) increased 18% to 60,804 million. Capacity (measured in available seat miles) expanded 17% to 68,993 million. Load factor (percentage of seats filled by passengers) was up to 88% from 87%. The figure was also higher than the .Zacks Consensus Estimate of 86%.
Passenger revenue per available seat mile increased 3% to 19.14 cents. Passenger mile yield increased to 21.72 cents from 21.27 cents. On an adjusted basis, total revenue per available seat mile inched up 1% to 21.18 cents in the June quarter. The figure was also higher than our estimate of 20.93 cents.
Total operating expenses, including special items, escalated 6% to $13,087 million. Salaries and related costs surged 25% to $3,692 million in the reported quarter.
Fuel gallons consumed increased 16% to $997 million. Average fuel price per gallon (adjusted) decreased 34% to $2.52. Non-fuel unit cost (adjusted or CASM-Ex) increased 2% to 13.06 cents in the reported quarter. The figure was, however, lower than our estimate of 13.10 cents. The airline had liquidity worth $8.8 billion at the end of the June quarter (including $2.8 billion under undrawn revolving credit facilities). Delta had an adjusted net debt of $19.84 billion.
Per Dan Janki, Delta’s chief financial officer, "Delta delivered $2.9 billion of free cash flow in the first half of the year, while consistently reinvesting in the business.”
Remaining Aspects of Outlook
Backed by strong booking trends for summer, DAL, currently carrying a Zacks Rank #2 (Buy), expects September-quarter revenues (adjusted) to increase in the 11-14% band from third-quarter 2022 actuals.
Third-quarter earnings are expected in the range of $2.2-$2. 5 per share. The Zacks Consensus Estimate for earnings is currently pegged at $2.11 per share. The adjusted operating margin in the September quarter is expected in mid-teens.
For third-quarter 2023, the carrier expects capacity to increase 16% from third-quarter 2022 actuals. Fuel price per gallon is expected in the $2.5-$2.70 range. Non-fuel unit cost (adjusted) for the September quarter is expected to decrease 1-3% from third-quarter 2022 actuals.
Management projects current-year total revenues (adjusted) to increase in the 17-20% range on a year-over-year basis. The operating margin is expected to be above 12%.
Copa Holdings is benefiting from an improvement in air travel demand. In first-quarter 2023, passenger revenues increased 28.5% from first-quarter 2019 levels due to higher yields.
CPA’s focus on its cargo segment is encouraging. In first-quarter 2023, cargo and mail revenues grew 51.8% from the first quarter of 2019 on higher cargo volumes and yields. Copa Holdings' fleet modernization and cost-management efforts are commendable as well.
The above-mentioned tailwinds are likely to continue aiding this Latin American carrier. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 24.38% upward over the past 60 days.
Allegiant is seeing a steady recovery in leisure air travel demand. In first-quarter 2023, this Las Vegas, NV-based company’s operating revenues grew 29.9% on a year-over-year basis. Passenger revenues, accounting for 93.7% of the top line, increased 31.3% on a year-over-year basis.
Allegiant's fleet modernization efforts are encouraging. The Zacks Consensus Estimate for ALGT's current-year earnings has been revised 21% upward in the past 60 days.
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Delta (DAL) Q2 Earnings Beat Estimates, Posts Upbeat FY23 View
Delta Air Lines (DAL - Free Report) kick-started the second-quarter 2023 earnings season for airlines on a bright note. The airline behemoth reported better-than-expected revenues and earnings per share driven by strong air travel demand.
Delta’s second-quarter 2023 earnings (excluding 16 cents from non-recurring items) of $2.68 per share comfortably beat the Zacks Consensus Estimate of earnings per share of $2.42. DAL reported earnings of $1.44 per share a year ago, dull in comparison to the current scenario, as air travel demand was not so buoyant then.
Revenues of $15,578 million beat the Zacks Consensus Estimate of $14,991.6 million. Total revenues increased 12.69% on a year-over-year basis driven by higher air travel demand.
Passenger revenues, accounting for 84.8% of total revenues, increased 21% year over year to $13,205 million and also beat our estimate of $11,570.7 million. Domestic markets contributed 67.7% to the total passenger revenues. Domestic passenger revenues in the June quarter increased 8% year over year. Passenger revenues also improved on the international front.
Cargo revenues declined 37% year over year to $172 million. The figure was also much lower than our estimate of $273.5 million. Other revenues decreased to $2,201 million from $2,594 million a year ago. The figure was also lower than our estimate of $2,535.6 million. Adjusted operating revenues (excluding third-party refinery sales) came in at $14,613 million, up 19% year over year.
Driven by the earnings and revenue beat, shares of Delta gained in the pre-market trading. Apart from that, management raised its earnings per share outlook for the current year, which found favor with investors. The company now expects 2023 earnings (on an adjusted basis) in the band of $6-$7 per share (earlier view was $6 per share). The Zacks Consensus Estimate of adjusted earnings of $6.21 per share is below the mid-point ($6.50) of the guided range. Free cash flow for the current year is still expected to be $3 billion.
Other Aspects of the Q2 Earnings Report
The adjusted operating margin was 17.1%. The company had reported an operating margin of 11.7% on an adjusted basis a year ago.
Below we present all figures (in % terms) in comparison with the second-quarter 2022 results.
Revenue passenger miles (a measure of air traffic) increased 18% to 60,804 million. Capacity (measured in available seat miles) expanded 17% to 68,993 million. Load factor (percentage of seats filled by passengers) was up to 88% from 87%. The figure was also higher than the .Zacks Consensus Estimate of 86%.
Passenger revenue per available seat mile increased 3% to 19.14 cents. Passenger mile yield increased to 21.72 cents from 21.27 cents. On an adjusted basis, total revenue per available seat mile inched up 1% to 21.18 cents in the June quarter. The figure was also higher than our estimate of 20.93 cents.
Total operating expenses, including special items, escalated 6% to $13,087 million. Salaries and related costs surged 25% to $3,692 million in the reported quarter.
Fuel gallons consumed increased 16% to $997 million. Average fuel price per gallon (adjusted) decreased 34% to $2.52. Non-fuel unit cost (adjusted or CASM-Ex) increased 2% to 13.06 cents in the reported quarter. The figure was, however, lower than our estimate of 13.10 cents. The airline had liquidity worth $8.8 billion at the end of the June quarter (including $2.8 billion under undrawn revolving credit facilities). Delta had an adjusted net debt of $19.84 billion.
Per Dan Janki, Delta’s chief financial officer, "Delta delivered $2.9 billion of free cash flow in the first half of the year, while consistently reinvesting in the business.”
Remaining Aspects of Outlook
Backed by strong booking trends for summer, DAL, currently carrying a Zacks Rank #2 (Buy), expects September-quarter revenues (adjusted) to increase in the 11-14% band from third-quarter 2022 actuals.
Third-quarter earnings are expected in the range of $2.2-$2. 5 per share. The Zacks Consensus Estimate for earnings is currently pegged at $2.11 per share. The adjusted operating margin in the September quarter is expected in mid-teens.
For third-quarter 2023, the carrier expects capacity to increase 16% from third-quarter 2022 actuals. Fuel price per gallon is expected in the $2.5-$2.70 range. Non-fuel unit cost (adjusted) for the September quarter is expected to decrease 1-3% from third-quarter 2022 actuals.
Management projects current-year total revenues (adjusted) to increase in the 17-20% range on a year-over-year basis. The operating margin is expected to be above 12%.
Other Key Picks
Investors interested in the Zacks Airline industry may also consider Copa Holdings (CPA - Free Report) and Allegiant Travel Company (ALGT - Free Report) . Copa currently sports a Zacks Rank #1 (Strong Buy) while Allegiant currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Copa Holdings is benefiting from an improvement in air travel demand. In first-quarter 2023, passenger revenues increased 28.5% from first-quarter 2019 levels due to higher yields.
CPA’s focus on its cargo segment is encouraging. In first-quarter 2023, cargo and mail revenues grew 51.8% from the first quarter of 2019 on higher cargo volumes and yields. Copa Holdings' fleet modernization and cost-management efforts are commendable as well.
The above-mentioned tailwinds are likely to continue aiding this Latin American carrier. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 24.38% upward over the past 60 days.
Allegiant is seeing a steady recovery in leisure air travel demand. In first-quarter 2023, this Las Vegas, NV-based company’s operating revenues grew 29.9% on a year-over-year basis. Passenger revenues, accounting for 93.7% of the top line, increased 31.3% on a year-over-year basis.
Allegiant's fleet modernization efforts are encouraging. The Zacks Consensus Estimate for ALGT's current-year earnings has been revised 21% upward in the past 60 days.