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Delta (DAL) Q2 Earnings Surpass Estimates, '18 Guidance Cut


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Delta Air Lines Inc. DAL kicked off second-quarter 2018 earnings season for the airline space on a bright note. The company's earnings and revenues surpassed the Zacks Consensus Estimate in the quarter.

In the reported quarter, earnings (excluding 30 cents from non-recurring items) of $1.77 per share surpassed the Zacks Consensus Estimate by 5 cents. The bottom line also expanded on a year-over-year basis despite high fuel costs. Results were aided by higher revenues.

Operating revenues came in at $11,775 million, outpacing the Zacks Consensus Estimate of $11,678.8 million. The top line increased more than 9% from the year-ago figure. Strong demand for air travel boosted revenues.

In the quarter under review, passenger revenues, cargo revenues and others increased 8%, 19% and 27%, respectively, on a year-over-year basis. Average fuel price (adjusted) was up 30.7% to $2.17 per gallon.

Operating Statistics

Revenue passenger miles (a measure of air traffic) increased 3.2% on a year-over-year basis. Additionally, capacity or available seat miles expanded 3.5%. Load factor (percentage of seats filled by passengers) came in at 86.7%, down 20 basis points year over year as capacity expansion outweighed traffic growth in the quarter.

Passenger revenue per available seat mile (PRASM) was up 4.4% year over year. In addition, passenger mile yield grew 4.6%. Total revenues per available seat miles (TRASM: adjusted ) also increased 4.6% (on a year-over-year basis) in the second quarter.

Delta Air Lines, Inc. Price, Consensus and EPS Surprise

Delta Air Lines, Inc. Price, Consensus and EPS Surprise | Delta Air Lines, Inc. Quote

Operating Expenses

Total operating expenses, including special items, were up 15% year over year to $10,095 million. Cost per available seat mile (excluding fuel and profit sharing) rose 2.9% owing to higher aircraft rent and other factors.

Liquidity

At the end of the second quarter, Delta had $1.89 billion in cash and cash equivalents and $8.56 billion long-term debt and capital leases. Operating cash flow and free cash flow in the quarter were $2.8 billion and $1.4 million, respectively.

Dividend and Share Repurchase

Delta returned $813 million to its shareholders through dividends ($213 million) and share buybacks ($600 million) in the quarter under review. Also, the company's board cleared a dividend hike to the tune of 15%. The new quarterly dividend is 35 cents per share. The first instalment of the new dividend will be paid on Aug 16 to the shareholders of record at the close of business on Jul 26.

Guidance

For the third quarter of 2018, the carrier expects earnings per share to be between $1.65 and $1.85. The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.82 per share. The carrier anticipates pre-tax margin in the 12-14% band. The estimated fuel price, including taxes and refinery impact, is envisioned in the range of $2.32-$2.37 per gallon. Total unit revenue, excluding refinery sales, is anticipated to increase in the band of 3.5-5.5%. System capacity is expected to be up approximately 3-4% on a year-over-year basis. Cost per Available Seat Mile, excluding fuel and profit sharing, is forecasted to be approximately flat.

For 2018, the carrier trimmed its projection on earnings per share citing high fuel costs. The carrier is likely to incur additional fuel costs to the tune of $2 billion in 2018 due to an increase in oil price. It expects current-year earnings in the range of $5.35-$5.70 (the earlier guidance had estimated the metric in the $6.35-$6.70 band). The Zacks Consensus Estimate for current-year earnings is pegged at $5.75 per share. Total revenues are expected to grow in the 7-8% range on a year-over-year basis.

Fuel price, including taxes and refinery impact, is anticipated to lie between $2.20 and $2.30, while Cost per Available Seat Mile, excluding fuel and profit sharing, is estimated to increase 1-2% year over year in 2018. Meanwhile, capacity is projected to expand approximately 3% year over year.

Upcoming Releases

Investors interested in the  Zacks Airline industry  are keenly awaiting second-quarter earnings reports from key players like United Continental Holdings, Inc. UAL , Allegiant Travel Company ALGT and SkyWest, Inc. SKYW in the coming days. While United Continental is scheduled to report on Jul 17, Allegiant and SkyWest are scheduled to follow suit on Jul 25 and Jul 26, respectively.

Zacks Rank

Delta carries a Zacks Rank #3 (Hold).  You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DAL , UAL , SKYW , ALGT



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