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Delta Air Lines (DAL) Q4 Earnings Beat, Revenues Lag

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Delta Air Lines (DAL - Free Report) , which kick-started the fourth-quarter 2018 earnings season in the airline space, delivered a mixed performance. While the company’s earnings topped estimates, it posted lower-than-expected revenues in the quarter.

The Atlanta, GA-based carrier’s fourth-quarter earnings (excluding 19 cents from non-recurring items) of $1.30 per share surpassed the Zacks Consensus Estimate by 3 cents. Moreover, the bottom line increased on a year-over-year basis.

Operating revenues of $10,742 million, however, fell short of the Zacks Consensus Estimate of $10,828.7 million. Revenues increased 4.9% from the year-ago figure.

During the quarter, passenger revenues and cargo revenues improved 6.9% and 5.4%, respectively, both on a year-over-year basis. However, other revenues decreased 12.3%. The average fuel price (adjusted) in the fourth quarter was $2.42 per gallon, reflecting an increase of 25.3% on a year-over-year basis.

Operating Statistics

Revenue passenger miles (a measure of air traffic) increased 4% to 53.2 billion. Capacity or available seat miles expanded 4.1% to 62.5 billion. Load factor (percentage of seats filled by passengers) came in at 85.2%, flat year over year. Passenger revenue per available seat mile (PRASM) increased 2.7% year over year to 15.43 cents.

Total revenue per available seat mile (TRASM), on an adjusted basis, increased 3.2% year over year to 17.16 cents. Passenger mile yield improved 2.8% to 18.12 cents.

Operating Expenses

Total operating expenses, including special items, climbed 6% year over year to $9,652 million. Operating cost per available seat mile increased 2.3% to 15.44 cents. Non-fuel unit costs declined 0.5% to 10.74 cents.

Delta Air Lines, Inc. Price, Consensus and EPS Surprise

 

Delta Air Lines, Inc. Price, Consensus and EPS Surprise | Delta Air Lines, Inc. Quote

Liquidity

Delta exited the quarter with $1,565 million in cash and cash equivalents. Delta generated free cash flow of $45 million and adjusted operating cash flow of $1.3 billion in the fourth quarter.

Adjusted debt at the end of 2018 stood at $16 billion. The company managed to reduce its net debt significantly from the 2009 levels.

Dividend and Share Repurchase

Delta returned $563 million to its shareholders through dividends ($238 million) and share buybacks ($325 million) in the quarter under review.  The company’s board cleared a dividend hike to the tune of 15% in 2018. The new quarterly dividend is 35 cents per share. The carrier returned $2.5 billion to shareholders in 2018 through dividends ($909 million) and share buybacks ($1.6 billion).

Annual Results

For full-year 2018, the carrier’s earnings (on an adjusted basis) climbed 19% to $5.65 per share. Revenues increased 8% to nearly $44 billion. The Zacks Consensus Estimate was of earnings of $5.58 per share on revenues of $44.44 billion.

Guidance

For the first quarter of 2019, the carrier expects earnings per share to be between 70 cents and 90 cents. The Zacks Consensus Estimate for first-quarter earnings is pegged at 92 cents per share. The tepid guidance disappointed investors. Consequently, the stock shed value in pre-market trading.

The carrier anticipates pre-tax margin in the 6.5-8.5% band. The estimated fuel price, including taxes, settled hedges and refinery impact, is envisioned in the range of $1.95-$2.05 per gallon.

TRASM, on an adjusted basis, is anticipated in the range of 0% to 2% (year-over-year change). System capacity is expected to be up approximately 4% on a year-over-year basis. Cost per available seat mile, excluding fuel and profit sharing, is anticipated to increase in the 1-2% band

For full-year 2019, earnings per share is expected between $6 and $7. The Zacks Consensus Estimate is pegged at $6.53 per share.

Upcoming Releases

Investors interested in the Zacks Airline industry are keenly awaiting fourth-quarter earnings reports from key players like JetBlue Airways Corp. (JBLU - Free Report) , Southwest Airlines (LUV - Free Report) and Allegiant Travel Co. (ALGT - Free Report) in the coming days. While JetBlue and Southwest are scheduled to report on Jan 24, Allegiant will follow suit on Jan 30.

Zacks Rank

Delta carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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