Delta Air Lines DAL, which kick-started the fourth-quarter 2019 earnings season for the airline space, reported earnings per share (excluding 1 cent from non-recurring items) of $1.70 per share, which surpassed the Zacks Consensus Estimate by 30 cents. The bottom line also improved 30.8% on a year-over- year basis, mainly owing to low fuel costs. Delta’s results were also aided by the sale of its stake in GOL Linhas GOL.
Operating revenues in the quarter came in at $11,439 million, edging past the Zacks Consensus Estimate. However, the top line increased 6.5% on a year-over-year basis, backed by upbeat air-travel demand from holiday travelers.
During the reported quarter, passenger revenues, which accounted for 89.6% of the top line, improved 6% mainly owing to strong demand for air travel. Meanwhile, cargo revenues declined 13%. Other revenues increased 14%. The average fuel price (adjusted) in the fourth quarter was $1.99 per gallon, down 17.7% on a year-over-year basis.
Revenue passenger miles (a measure of air traffic) increased 5.2% to 56 billion. Capacity (measured in available seat miles) expanded 4.7% to 65.46 billion. Load factor (percentage of seats filled by passengers) improved 40 basis points to 85.6%, as traffic growth outpaced capacity expansion. Passenger revenue per available seat mile (PRASM) increased 1.4% year over year to 15.65 cents. Passenger mile yield improved 0.9% to 18.29 cents. On an adjusted basis, total revenue per available seat mile (TRASM) in the fourth quarter increased 2.4% year over year to 17.47 cents.
Total operating expenses, including special items, climbed 4% year over year to $10,040 million. Operating cost per available seat mile (non-fuel or CASM- Ex) increased 4.4% to 11.21 cents, driven by increased investments and a mark-up of benefit-related balance-sheet obligations.
Delta Air Lines, Inc. Price, Consensus and EPS Surprise
Delta Air Lines, Inc. price-consensus-eps-surprise-chart | Delta Air Lines, Inc. Quote
Liquidity, Dividend and Share Repurchase
Delta generated free cash flow of $141 million and operating cash flow of $969 million in the fourth quarter. For full-year 2019, the carrier generated $8.4 billion of operating cash flow and $4.2 billion of free cash flow. Delta exited the quarter with $2, 882 million in cash and cash equivalents compared with the $1, 565 million recorded at the end of 2018.
Delta returned $484 million to its shareholders through dividends ($259 million) and share buybacks ($225 million) in the quarter under review. For the full year, Delta returned $3 billion to shareholders through dividends ($980 million) and share buybacks ($2 billion).
For full-year 2019, the carrier’s earnings (on an adjusted basis) climbed 30% to $7.31 per share. Revenues increased 7.5% to $47 billion. The Zacks Consensus Estimate was of earnings of $7.03 per share on revenues of $46.9 billion.
For the first quarter of 2020, the carrier expects revenues to grow in the range of 5% to 7%. The estimated fuel price, including taxes and refinery impact, is expected in the range of $2-$2.20 per gallon for the ongoing quarter. Pre-tax margin is expected to be flat on a year-over-year basis. The company expects total revenues per available seat miles (TRASM: adjusted) to be either flat or increase up to 2% in the quarter. Non fuel unit cost (CASM -Ex) is estimated to increase in the 2-3% range during this period.
The carrier anticipates to generate free cash flow of $4 billion in 2020. The carrier aims to deliver a three-year cumulative free cash flow in excess of $10 billion by Dec 31, 2020. Delta expects 2020 earnings per share between $6.75 and $7.75. The mid-point of the guided range ($7.25 per share) is above the Zacks Consensus Estimate of $7.18.
Investors interested in the Zacks Airline industry are keenly awaiting fourth-quarter 2019 earnings reports from key players like United Airlines UAL , JetBlue Airways JBLU and Alaska Air Group ALK. While United Airlines is scheduled to report on Jan 21, JetBlue and Alaska Air will do so on Jan 23.
Delta currently 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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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
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