Airline behemoth Delta Air Lines ( DAL ) reported
fourth-quarter 2012 adjusted earnings of 28 cents, in line with the
Zacks Consensus Estimate. The results, however, dropped 37.8% from
year-ago adjusted profit of 45 cents, hurt by higher costs
associated with aircraft rent, landing fees and other items.DELTA AIR LINES (DAL): Free Stock Analysis
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Revenues edged up 2% year over year to $8.60 billion in the
reported quarter but fell marginally short of the Zacks Consensus
Estimate of $8.61 billion. On an annualized basis, Passenger
revenues grew 3%, while Other revenues remained nearly on par with
the last-year quarter. However, Cargo revenue dipped 6%.
For full-year 2012, Delta - the second largest airline company in
U.S. after United Continental Holdings Inc. ( UAL ) - posted earnings
of $1.83 per share (in line with our projection and increased 29.8%
year over year), on revenues of $36.7 billion (up 4.4% from the
Airlines traffic, measured in billions of revenue passenger miles,
went up by 1% year over year to 45.3 billion. Capacity or available
seat miles fell 1% to 54.3 billion, while load factor (percentage
of seats filled with passengers) grew 160 basis points year over
year to 83.3%. Passenger revenue per available seat mile (PRASM) or
unit revenue rose 4% year over year, led by a 2% increase in
Total operating expenses, including special items, increased 8%
year over year to $577 million, primarily due to steeper aircraft
fuel and salaries. Consolidated unit cost or cost per available
seat mile (CASM), excluding fuel cost, profit sharing and special
items, crept up 6%.
At the end of 2012, the company had $3.4 billion in cash and
short-term investments and $1.8 billion in undrawn revolving credit
facilities, netting $5.2 billion in unrestricted liquidity. By 2012
end, the company had net debt of $11.7 billion.
The company generated operating cash flow of $585 million in the
fourth quarter while capital expenditures were $599 million.
For the first quarter of 2013, Delta Air Lines expects operating
margin in the range of 2.5-4.5% and consolidated unit cost,
excluding fuel and profit sharing, to grow 6-8% year over year.
Additionally, the company expects domestic flying to decrease 1-3%
year over year and international flying to decrease 3-5% year over
The estimated fuel price, including taxes and hedges, is
approximately in between $3.15 and $3.20 per gallon. Capital
expenditures are estimated at $500-$600 million.
Other Airline Stock
Of the other stocks in the sector, Southwest Airlines
Co. ( LUV )
will release its fourth quarter results on Jan 24, while
JetBlue Airways Corp. ( JBLU ) will release
the same on Jan 29.
Delta currently holds a Zacks Rank #3, implying a short-term Hold
rating. We believe that the company is progressing well on
improving ancillary revenues by adding new services under its hood
as well as introducing products, which are enhancing its value and