Delta Air Lines Inc.
) reported first-quarter 2014 adjusted earnings of 33 cents per
share, surpassing the Zacks Consensus Estimate of 29 cents. The
bottom line improved a whopping 230.0% from the year-ago adjusted
profit of 10 cents buoyed by operational efficiency as well as
reduced fuel and maintenance expenses.
Despite a harsh winter and shift of Easter into April,
revenues increased 4.9% year over year to $8.92 billion in the
reported quarter, and surpassed the Zacks Consensus Estimate of
$8.89 billion. On a year-over-year basis, Passenger revenues grew
4.9% and Other revenues improved 8.5%. However, Cargo revenues
dipped 8.8%.The impressive results have pushed the stock up by
5.15% in the pre-market trade on NYSE.
Delta cancelled 17,000 flights owing to harsh winter weather
during January and February. The flight cancellations resulted in
$90.0 million lower revenues and $55.0 million lower pre-tax
Airlines traffic, measured in billions of revenue passenger
miles, went up 3.5% year over year to 44.6 billion. Capacity or
available seat miles increased 1.7% from a year ago to 53.9
billion, while load factor (percentage of seats filled with
passengers) moved up 150 basis points year over year to 82.7%.
Passenger revenue per available seat mile (PRASM) or unit revenue
rose 3.2% year over year, along with a 1.3% increase in
Total operating expenses, crept up 0.2% year over year to
$8,916.0 million, primarily due to rise in depreciation.
Consolidated unit cost or cost per available seat mile (CASM),
excluding fuel cost, profit sharing and special items increased
As of Mar 31, 2014, the company had $3.7 billion in cash and
short-term investments and net debt of $9.1 billion. The company
has reduced its net debt by $7.9 billion since 2009.
The company generated operating cash flow of $951.0 million in
the first quarter while capital expenditures were $570.0
Dividend and Share Repurchase
During the quarter, the company returned $176 million to its
shareholders. It paid a dividend of 6 cents aggregating $51
million and repurchased 4.0 million shares totaling $125
The company expects a strong demand environment, corporate
revenue gains and synergies from the Delta-Virgin joint venture
to lead to mid single-digit revenue growth for the second
Delta expects operating margin in the range of 14-16% and
consolidated unit cost, excluding fuel and profit sharing, to
increase 0-2.0% year over year in the second quarter.
The estimated fuel price, including taxes and hedges, is
approximately $2.97 to $3.02 per gallon. System capacity is
expected to increase 2-3%.
Upcoming Earning Releases
Of the other stocks in the sector,
United Continental Holdings Inc.
Southwest Airlines Co.
JetBlue Airways Corp.
) will release their second quarter results on Jan 24, 2014.
We believe that the company will benefit from various
strategic measures such as route launches, introduction of
ancillary products, strong customer service and fleet revamping.
However, a weak cargo business, competitive pressure and rise in
non-fuel expenses remain near-term concerns.
Delta currently carries a Zacks Rank #2 (Buy).
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
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UNITED CONT HLD (UAL): Free Stock Analysis
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