Delta Air Lines Inc.
) reported fourth-quarter 2013 adjusted earnings of 65 cents per
share, surpassing the Zacks Consensus Estimate of 63 cents. The
bottom line improved 132.1% from the year-ago adjusted profit of
28 cents buoyed by operational efficiency, reduced fuel cost and
slow growth of non-fuel expenses.
For full-year 2013, Delta posted earnings of $3.15 per share
(ahead of our projection of $3.13 and up 71.0% year over year) on
revenues of $37.8 billion (ahead of our $37.7 billion expectation
and up 3.0% from the prior year).
Revenues increased 6% year over year to $9.08 billion in the
reported quarter and was ahead of the Zacks Consensus Estimate of
$9.03 billion. On an annualized basis, Passenger revenues grew 6%
and Other revenues improved 3% from the prior-year quarter.
However, Cargo revenues dipped 1.3%.
Airlines traffic, measured in billions of revenue passenger
miles, went up 2% year over year to 46.2 billion. Capacity or
available seat miles increased 3% from a year ago to 55.9
billion, while load factor (percentage of seats filled with
passengers) declined 70 basis points year over year to 82.6%.
Passenger revenue per available seat mile (PRASM) or unit revenue
rose 3% year over year, led by a 4% increase in yield.
Total operating expenses, including special items, increased
8% year over year to $8,375 million, primarily due to aircraft
maintenance and aircraft restructuring. Consolidated unit cost or
cost per available seat mile (CASM), excluding fuel cost, profit
sharing and special items, crept up 1%.
At the end of 2013, the company had $3.8 billion in cash and
short-term investments and net debt of $9.4 billion. The company
has reduced its net debt by $7.5 billion since 2009.
The company generated operating cash flow of $1.2 billion in
the fourth quarter while capital expenditures were $900
Dividend and Share Repurchase
During the quarter, the company returned $201 million to its
shareholders. It paid a dividend of 6 cents aggregating $51
million and repurchased 5.5 million shares totaling $150
For the first quarter of 2014, the company expects a strong
demand environment, capacity addition and a number of strategic
initiatives to lead to solid margin expansion.
Delta expects operating margin in the range of 6-8% and
consolidated unit cost, excluding fuel and profit sharing, to
increase 0.5-1.5% year over year in the first 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.
) will release their fourth quarter results on Jan 23, while
JetBlue Airways Corp.
) will release the same on Jan 27. LUV and JBLU currently carry a
Zacks Rank #1 (Strong Buy), while UAL carries a Zacks Rank #2
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 slow
economic recovery keeps us sidelined on the stock. Delta
currently carries a Zacks Rank #3 (Hold).
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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