Delta Air Lines (NYSE:) , 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 (NYSE:) .
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.
Other Details
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.
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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).
Annual Results
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.
Guidance
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.
Upcoming Releases
Investors interested in the Zacks Airline industry are keenly awaiting fourth-quarter 2019 earnings reports from key players like United Airlines (NASDAQ:) , JetBlue Airways (NASDAQ:) and Alaska Air Group (NYSE:) . While United Airlines is scheduled to report on Jan 21, JetBlue and Alaska Air will do so on Jan 23.
Zacks Rank
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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