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Delta Air Lines (DAL - Free Report) has reported fourth-quarter 2023 earnings (excluding $1.88 from non-recurring items) of $1.28 per share, which comfortably beat the Zacks Consensus Estimate of $1.17. Earnings, however, declined 13.51% on a year-over-year basis due to high labor costs.
Revenues of $14,223 million surpassed the Zacks Consensus Estimate of $14,069.5 million and increased 5.87% on a year-over-year basis, driven by strong holiday-air-travel demand. Adjusted operating revenues (excluding third-party refinery sales) came in at $13,661 million, up 11% year over year.
Passenger revenues, accounting for 85.6% of the total revenues, rose 12% year over year to $12,174 million also beat our estimate of $11,538.9 million. Domestic passenger revenues grew 7% year over year. Passenger revenues improved on the international front.
Cargo revenues plunged 24% year over year to $188 million. The figure lagged our estimate of $235.2 million. Other revenues decreased 19% to $1,861 million. The figure missed our estimate of $2,344 million.
The adjusted operating margin was 9.7%. The company reported an operating margin of 9.3% on a reported basis a year ago.
Below, we present all figures (in percentage terms) in comparison with the fourth-quarter 2022 results.
Revenue passenger miles (a measure of air traffic) increased 14% to 57,655 million. Capacity (measured in available seat miles) expanded 15% to 68,462 million. Load factor (percentage of seats filled by passengers) dipped to 84% from 85%. The figure was also lower than our estimate of 87.1%.
Passenger revenues per available seat mile decreased 3% to 17.78 cents. Passenger mile yield tumbled to 21.12 cents from 21.57 cents. On an adjusted basis, total revenues per available seat mile declined 3% to 19.95 cents. The figure was also lower than our estimate of 20.16 cents.
Total operating expenses, including special items, increased 8% to $12,900 million. Salaries and related costs hiked 23% to $3,769 million. The increase was due to higher wages arising from the contract with pilots that was ratified in March 2023.
Fuel gallons consumed jumped 13% to $978 million. Average fuel price per gallon (adjusted) fell 6% to $3. Non-fuel unit cost (adjusted or CASM-Ex) inched up 1.1% to 13.29 cents.
DAL exited the final quarter of 2023 with cash and cash equivalents of $2,741 million compared with $2,835 million at the end of the prior quarter. The company had an adjusted net debt of $21,424 million. It generated $499 million of adjusted cash from operating activities. Gross capital expenditure was $1,201 million on an adjusted basis.
Other Notable Developments
In a bid to modernize its fleet, Delta inked a deal with Airbus to buy 20 A350-1000 widebody jets. Management expects deliveries of the jets to commence in 2026. It also has options to buy 20 more widebody jets from the European plane maker.
These planes offer greater fuel efficiency apart from adding higher gauge, more premium seating and greater cargo capabilities to the airline’s international widebody fleet. DAL also entered into a service agreement with Rolls Royce to service its Trent XWB-97 engines.
Outlook
First-quarter 2024 earnings are expected to be 25-50 cents per share. The Zacks Consensus Estimate is pegged at 34 cents, lower than the mid-point of the guided range. The adjusted operating margin in the March quarter is anticipated to be 5%.
Management projects first-quarter 2024 total revenues (adjusted) in the $12.2-$12.55 billion band, reflecting an increase of 3-6% from first-quarter 2023 actuals. Unit Revenues for the March quarter are suggested to be flat to down 3 % from first-quarter 2023 actuals.
Available seat miles in the March quarter are envisioned to increase 6% from the year ago actuals. Non-fuel unit cost is likely to increase 3%. First-quarter 2024 fuel price per gallon is suggested in the $2.5-$2.7 range.
Due to supply-chain woes and economic uncertainty, DAL trimmed its earnings per share outlook for full-year 2024. It now forecast 2024 adjusted earnings in the range of $6-$7 (projected to be above $7 previously). The Zacks Consensus Estimate is currently pegged at $6.66, higher than the mid-point (6.50) of the guided range.
For 2024, adjusted free cash flow is expected in the $3-$4 billion range. Available seat miles are suggested to increase in the 3-5% band from first-quarter 2023 actuals. Fuel price per gallon is projected to be $2.7.
American Airlines is being aided by the improved air-travel-demand scenario, particularly on the domestic front. The carrier's debt-reduction efforts are impressive as well. Management aims to reduce debt by $15 billion by 2025-end.
The Zacks Consensus Estimate for 2024 earnings has been revised upward to the tune of 4.19% over the past 60 days. AAL has surpassed the Zacks Consensus Estimate for earnings in each of the past four quarters. The average beat is 23.83%.
Copa Holdings is also aided by the improved air-travel-demand scenario. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive.
For 2023, CPA’s earnings are expected to register an 84.75% increase from the 2022 actuals. Copa has outpaced the Zacks Consensus Estimate for earnings in each of the past four quarters. The average surprise is 16.81%.
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Delta (DAL) Tops on Q4 Earnings & Revenues, Cuts FY24 EPS View
Delta Air Lines (DAL - Free Report) has reported fourth-quarter 2023 earnings (excluding $1.88 from non-recurring items) of $1.28 per share, which comfortably beat the Zacks Consensus Estimate of $1.17. Earnings, however, declined 13.51% on a year-over-year basis due to high labor costs.
Revenues of $14,223 million surpassed the Zacks Consensus Estimate of $14,069.5 million and increased 5.87% on a year-over-year basis, driven by strong holiday-air-travel demand. Adjusted operating revenues (excluding third-party refinery sales) came in at $13,661 million, up 11% year over year.
Passenger revenues, accounting for 85.6% of the total revenues, rose 12% year over year to $12,174 million also beat our estimate of $11,538.9 million. Domestic passenger revenues grew 7% year over year. Passenger revenues improved on the international front.
Cargo revenues plunged 24% year over year to $188 million. The figure lagged our estimate of $235.2 million. Other revenues decreased 19% to $1,861 million. The figure missed our estimate of $2,344 million.
Delta Air Lines, Inc. Price and EPS Surprise
Delta Air Lines, Inc. price-eps-surprise | Delta Air Lines, Inc. Quote
Other Aspects of the Q4 Earnings Report
The adjusted operating margin was 9.7%. The company reported an operating margin of 9.3% on a reported basis a year ago.
Below, we present all figures (in percentage terms) in comparison with the fourth-quarter 2022 results.
Revenue passenger miles (a measure of air traffic) increased 14% to 57,655 million. Capacity (measured in available seat miles) expanded 15% to 68,462 million. Load factor (percentage of seats filled by passengers) dipped to 84% from 85%. The figure was also lower than our estimate of 87.1%.
Passenger revenues per available seat mile decreased 3% to 17.78 cents. Passenger mile yield tumbled to 21.12 cents from 21.57 cents. On an adjusted basis, total revenues per available seat mile declined 3% to 19.95 cents. The figure was also lower than our estimate of 20.16 cents.
Total operating expenses, including special items, increased 8% to $12,900 million. Salaries and related costs hiked 23% to $3,769 million. The increase was due to higher wages arising from the contract with pilots that was ratified in March 2023.
Fuel gallons consumed jumped 13% to $978 million. Average fuel price per gallon (adjusted) fell 6% to $3. Non-fuel unit cost (adjusted or CASM-Ex) inched up 1.1% to 13.29 cents.
DAL exited the final quarter of 2023 with cash and cash equivalents of $2,741 million compared with $2,835 million at the end of the prior quarter. The company had an adjusted net debt of $21,424 million. It generated $499 million of adjusted cash from operating activities. Gross capital expenditure was $1,201 million on an adjusted basis.
Other Notable Developments
In a bid to modernize its fleet, Delta inked a deal with Airbus to buy 20 A350-1000 widebody jets. Management expects deliveries of the jets to commence in 2026. It also has options to buy 20 more widebody jets from the European plane maker.
These planes offer greater fuel efficiency apart from adding higher gauge, more premium seating and greater cargo capabilities to the airline’s international widebody fleet. DAL also entered into a service agreement with Rolls Royce to service its Trent XWB-97 engines.
Outlook
First-quarter 2024 earnings are expected to be 25-50 cents per share. The Zacks Consensus Estimate is pegged at 34 cents, lower than the mid-point of the guided range. The adjusted operating margin in the March quarter is anticipated to be 5%.
Management projects first-quarter 2024 total revenues (adjusted) in the $12.2-$12.55 billion band, reflecting an increase of 3-6% from first-quarter 2023 actuals. Unit Revenues for the March quarter are suggested to be flat to down 3 % from first-quarter 2023 actuals.
Available seat miles in the March quarter are envisioned to increase 6% from the year ago actuals. Non-fuel unit cost is likely to increase 3%. First-quarter 2024 fuel price per gallon is suggested in the $2.5-$2.7 range.
Due to supply-chain woes and economic uncertainty, DAL trimmed its earnings per share outlook for full-year 2024. It now forecast 2024 adjusted earnings in the range of $6-$7 (projected to be above $7 previously). The Zacks Consensus Estimate is currently pegged at $6.66, higher than the mid-point (6.50) of the guided range.
For 2024, adjusted free cash flow is expected in the $3-$4 billion range. Available seat miles are suggested to increase in the 3-5% band from first-quarter 2023 actuals. Fuel price per gallon is projected to be $2.7.
Zacks Rank & Key Picks
Delta currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Airline industry may consider better-ranked stocks like American Airlines (AAL - Free Report) and Copa Holdings (CPA - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Airlines is being aided by the improved air-travel-demand scenario, particularly on the domestic front. The carrier's debt-reduction efforts are impressive as well. Management aims to reduce debt by $15 billion by 2025-end.
The Zacks Consensus Estimate for 2024 earnings has been revised upward to the tune of 4.19% over the past 60 days. AAL has surpassed the Zacks Consensus Estimate for earnings in each of the past four quarters. The average beat is 23.83%.
Copa Holdings is also aided by the improved air-travel-demand scenario. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive.
For 2023, CPA’s earnings are expected to register an 84.75% increase from the 2022 actuals. Copa has outpaced the Zacks Consensus Estimate for earnings in each of the past four quarters. The average surprise is 16.81%.