Delta Air Lines DAL reported third-quarter 2024 earnings (excluding 47 cents from non-recurring items) of $1.50 per share, which fell short of the Zacks Consensus Estimate of $1.56. Earnings decreased 26.11% on a year-over-year basis, mainly due to high labor costs.
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Revenues of $15.68 billion surpassed the Zacks Consensus Estimate of $15.37 billion and increased 1.2% on a year-over-year basis, driven by strong air travel demand. Adjusted operating revenues (excluding third-party refinery sales) totaled $14.59 billion, flat year over year. This was inclusive of the $380 million impact from the CrowdStrike CRWD-caused outage.
The global technology outage on July 19, caused by security software provider CrowdStrike’s software update, hit DAL the hardest among U.S. airlines. The company’s management stated that due to the outage, approximately 7,000 flights were canceled over five days, causing revenue loss and harassment to passengers.
Passenger revenues, which accounted for 83.6% of total revenues, remained flat year over year at $13.1 billion, in line with our estimate. Domestic passenger revenues were flat year over year. International demand remained strong, with trends improving throughout the September quarter in Transatlantic and Latin.
Cargo revenues improved 27% year over year to $196 million, which was higher than our estimate of $166.6 million. Other revenues increased 7% to $2.37 billion, which fell short of our estimate of $2.41 billion.
Delta Air Lines, Inc. Price, Consensus and EPS Surprise
Delta Air Lines, Inc. price-consensus-eps-surprise-chart | Delta Air Lines, Inc. Quote
Other Aspects of Q3 Earnings Report
Adjusted operating margin was 9.4% (including a 2.3 point impact of the CrowdStrike-caused outage) compared with 13.5% a year ago.
Below, we present all figures (in percentage terms) in comparison with third-quarter 2023 results.
Revenue passenger miles (a measure of air traffic) increased 3% to 66.3 billion. Capacity (measured in available seat miles) expanded 4% to 76.2 billion. Load factor (percentage of seats filled by passengers) decreased from 88% to 87%, in line with our estimate.
Passenger revenue per available seat mile decreased 4% at 17.21 cents. Passenger mile yield tumbled to 19.77 cents from 20.47. On an adjusted basis, total revenue per available seat mile decreased 3.6% to 19.16 cents, including a 1.1 point impact from the outage.
Total operating expenses, including special items, increased 6% to $14.28 billion. Salaries and related costs rose 13% to $4.23 billion. The increase was due to higher wages stemming from the contract with pilots that was ratified in March 2023.
Fuel gallons consumed jumped 3% to $1.09 billion. Average fuel price per gallon (adjusted) fell 9% to $2.53. Non-fuel unit cost (adjusted or CASM-Ex) increased 7% to 13.3 cents.
DAL exited the third quarter of 2024 with cash and cash equivalents of $3.97 billion compared with $2.84 billion at the end of third-quarter 2023. The company had an adjusted net debt of $18.7 billion at the end of the September quarter. Adjusted operating cash flow in the September quarter was $1.3 billion, with gross capital expenditures and free cash flow of $1.3 billion and $95 million, respectively.
Weak Q4 EPS Outlook
Delta Air Lines, currently carrying a Zack Rank #3 (Hold), expects fourth-quarter 2024 adjusted earnings to be in the band of $1.6-$1.85 per share. The midpoint of the guided range is below the Zacks Consensus Estimate of $1.82. The adjusted operating margin in the December quarter is expected to be in the 11-13% range.
Management projects fourth-quarter 2024 total revenues (adjusted) to be in the $13.9-$14.2 billion band, reflecting an increase of 2-4% from fourth-quarter 2023 actuals. DAL expects its unit revenues to take a hit of one point due to reduced travel demand around the time of the presidential elections in the United States.
Available seat miles in the December quarter are envisioned to increase 3-4% from the year-ago actuals. Non-fuel unit cost in the fourth quarter of 2024 is likely to increase 3%. The fourth-quarter 2024 fuel price per gallon is anticipated to be in the $2.2-$2.4 range.
A Transportation Stock to Consider
Investors interested in the Zacks Transportation sector may consider Air Transport Service Group ATSG.
ATSG currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has a mixed track record with respect to the earnings surprise. ATSG beat on earnings in two of the trailing four quarters and missed twice, the average miss being 7.7%. Shares of ATSG have climbed 14.5% in the past six months.
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