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Delta Air Lines (DAL) Up on Bullish Investor Day Update
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Shares of Delta Air Lines (DAL - Free Report) have been on an uptrend in recent times. The stock has comfortably outpaced the Zacks categorized Transportation-Airline industry over the last three months. The stock gained almost 34.42% compared with the industry, which advanced just 22% over the same period.
Continuing its trend of bullish performance, the Atlanta, GA-based airline behemoth presented a rosy picture at its Investor Day. The stock gained 1.36% on Dec 15, to close the trading session at $50.50 after the update. The carrier sounded bullish about its ability to reach long-term targets. Delta expects to perform well in 2017 (“a transition year”) driven by the uptick in business travel demand after the presidential election.
The carrier issued an improved outlook for passenger revenue per available seat miles (PRASM: a key measure of unit revenue) for the current quarter and expects the metric to decline by approximately 3% (earlier outlook had called for a decline in the band of 3% to 5%). Delta now expects fourth-quarter operating margin in the band of 10.5% to 11% (earlier outlook had projected the metric in the band of 9.5% to 10.5%).
The improving trends with respect to unit revenues are very encouraging. Delta, which carries a Zacks Rank # 3 (Hold), had initially expected return to positive unit revenue growth by mid-2016 but its plans were subsequently postponed by about six months. Multiple factors like unfavorable foreign currency movements pressurized yield.
Delta expects PRASM to be flat in the first quarter of 2017 on the back of the improving trends in many regions, particularly Latin America. The carrier expects non-fuel unit costs to increase in the range of 2–3% in 2017. We note that labor costs are surging not only at Delta but also at its peers like American Airlines Group (AAL - Free Report) , JetBlue (JBLU - Free Report) and United Continental Holdings (UAL - Free Report) due to recent labor deals.
Consolidated capacity is projected to expand by 1% in 2017. Domestic capacity is projected to expand 2% and the same on the international front is projected to decline 1%. With oil prices rising, Delta foresees fuel prices to increase year-over-year for the first time since 2014.
Delta, which is constantly working toward reducing its debt (net) levels, also stated that it remains focused on rewarding shareholders through dividends and buybacks. The carrier expects to complete the $5 billion buyback program by mid 2017. Moreover, it intends to return at least 70% of free cash flow to its investors over the next two years.
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Delta Air Lines (DAL) Up on Bullish Investor Day Update
Shares of Delta Air Lines (DAL - Free Report) have been on an uptrend in recent times. The stock has comfortably outpaced the Zacks categorized Transportation-Airline industry over the last three months. The stock gained almost 34.42% compared with the industry, which advanced just 22% over the same period.
Continuing its trend of bullish performance, the Atlanta, GA-based airline behemoth presented a rosy picture at its Investor Day. The stock gained 1.36% on Dec 15, to close the trading session at $50.50 after the update. The carrier sounded bullish about its ability to reach long-term targets. Delta expects to perform well in 2017 (“a transition year”) driven by the uptick in business travel demand after the presidential election.
The carrier issued an improved outlook for passenger revenue per available seat miles (PRASM: a key measure of unit revenue) for the current quarter and expects the metric to decline by approximately 3% (earlier outlook had called for a decline in the band of 3% to 5%). Delta now expects fourth-quarter operating margin in the band of 10.5% to 11% (earlier outlook had projected the metric in the band of 9.5% to 10.5%).
The improving trends with respect to unit revenues are very encouraging. Delta, which carries a Zacks Rank # 3 (Hold), had initially expected return to positive unit revenue growth by mid-2016 but its plans were subsequently postponed by about six months. Multiple factors like unfavorable foreign currency movements pressurized yield.
Delta expects PRASM to be flat in the first quarter of 2017 on the back of the improving trends in many regions, particularly Latin America. The carrier expects non-fuel unit costs to increase in the range of 2–3% in 2017. We note that labor costs are surging not only at Delta but also at its peers like American Airlines Group (AAL - Free Report) , JetBlue (JBLU - Free Report) and United Continental Holdings (UAL - Free Report) due to recent labor deals.
Consolidated capacity is projected to expand by 1% in 2017. Domestic capacity is projected to expand 2% and the same on the international front is projected to decline 1%. With oil prices rising, Delta foresees fuel prices to increase year-over-year for the first time since 2014.
Delta, which is constantly working toward reducing its debt (net) levels, also stated that it remains focused on rewarding shareholders through dividends and buybacks. The carrier expects to complete the $5 billion buyback program by mid 2017. Moreover, it intends to return at least 70% of free cash flow to its investors over the next two years.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>