Post Earnings Coverage as Delta Airlines Revenue Outperformed Market Expectations

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Accesswire 17-Jan-2017 7:15 AM
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Upcoming AWS Coverage on American Airlines Group
LONDON, UK / ACCESSWIRE / January 17, 2017 / Active Wall St. announces its post-earnings coverage on Delta Air Lines, Inc. (NYSE: DAL). The Company posted its fourth quarter and fiscal 2016 results on January 12, 2017. The air carrier revenue topped expectations and provided an upbeat guidance. Register with us now for your free membership at: http://www.activewallst.com/register/.
One of Delta Air Lines' competitors within the Major Airlines space, American Airlines Group, Inc. (NASDAQ: AAL), is estimated to report earnings on February 03, 2017. AWS will be initiating a research report on American Airlines following the release of its next earnings results.
Today, AWS is promoting its earnings coverage on DAL; touching on AAL. Get our free coverage by signing up to:
http://www.activewallst.com/registration-3/?symbol=DAL
http://www.activewallst.com/registration-3/?symbol=AAL
Earnings Reviewed
For the three months ended December 31 2016, Delta's operating revenue was down $44 million versus the prior year to $9.46 billion. The Company's revenue numbers were above analysts' expectations of $9.40 billion. During the reported quarter, the Company's Passenger unit revenues declined 1.9% to $7.97 billion on a 0.9% increase in capacity, while the cargo unit revenues fell 9.8% to $174 million.
For Q4 FY16, the airlines' earnings fell to $622 million, or $0.84 per share, down 37% from $980 million, or $1.25 a share, in the same period a year ago. The Company attributed the drop in net income to the impact of the new pilot agreement ratified on December 01, 2016 with retroactive effect to January 01, 2016 and included the FY16 impact of the new contract totaling $475 million of expense, of which $380 million relates to the first three quarters of the year. Excluding non-recurring items, adjusted earnings per share came in at $0.82 per share, matching Wall Street's expectations.
Operating Statistics
During Q4 2016, Delta's revenue passenger miles increased marginally to 50 billion, while capacity or available seat miles edged up 0.9% to 58.7 billion. During the reported quarter, the Company's load factor declined 10 basis points on a y-o-y basis to 85.1% as traffic growth was outpaced by capacity expansion in Q4 2016. The Company's passenger revenue per available seat mile (PRASM) dipped 2.7% y-o-y to $0.13.
Cost Performance
During Q4 FY16, Delta's fuel expense declined $240 million to $1.49 billion compared to the same period in 2015, as 12% higher market prices were offset by the prior year's hedge losses. Delta's adjusted fuel price per gallon for Q4 2016 was $1.60. The Company's consolidated unit cost CASM-Ex including profit sharing increased 10.6% to 11.25 for Q4 2016 compared to the prior year's same period, primarily driven by the impact of the new pilot agreement. Non-operating expense declined $116 million for reported quarter due to a $75 million loss in the prior year for the write-off of Venezuela currency and $10 million of lower interest expense from Delta's debt reduction initiatives.
Cash Flow, Shareholder Returns, and Adjusted Net Debt
During Q4 2016, Delta generated $1.2 billion of adjusted operating cash flow and $640 million of free cash flow. The Company used this strong cash generation to invest $600 million into the business for aircraft modifications, facilities upgrades and technology improvements. For the reported quarter, the Company returned $449 million to shareholders comprised of $149 million of dividends and $300 million of share repurchases. Delta returned $3.1 billion to its owners in FY16 through dividends and share repurchases. Delta's adjusted net debt at the end of the quarter stood at $6.1 billion, a $500 million reduction compared to the end of 2015.
Outlook
For Q1 FY17, Delta expects passenger unit revenue to be flat to up 2%, with capacity flat to down. The carrier expects operating margin in the range of 11% to 13% for the upcoming quarter. The estimated fuel price, including taxes and refinery impact, is expected in the range of $1.68 to $1.73 per gallon for Q1 2017.
Stock Performance
On Friday, January 13, 2017, the stock closed the trading session at $51.23, slightly climbing 0.67% from its previous closing price of $50.89. A total volume of 7.38 million shares have exchanged hands. Delta Air Lines' stock price rallied 28.63% in the last three months, 29.44% in the past six months, and 14.87% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 4.15%. The stock is trading at a PE ratio of 8.29 and has a dividend yield of 1.58%.
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