Post Earnings Coverage as Delta Air Lines Beat Q1 Earnings Estimates

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Accesswire 25-Apr-2017 8:15 AM
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Upcoming AWS Coverage on United Continental Holdings Post-Earnings Results
LONDON, UK / ACCESSWIRE / April 25, 2017 / Active Wall St. announces its post-earnings coverage on Delta Air Lines, Inc. (NYSE: DAL). The Company announced its first quarter fiscal 2017 results on April 12, 2017. The air carrier reported a y-o-y decline in revenue and earnings. Register with us now for your free membership at:
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One of Delta Air Lines' competitors within the Major Airlines space, United Continental Holdings, Inc. (NYSE: UAL), reported its earnings results on April 17, 2017 after market close. AWS will be initiating a research report on United Continental Holdings in the coming days.
Today, AWS is promoting its earnings coverage on DAL; touching on UAL. Get our free coverage by signing up to:
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Earnings Reviewed
For the three months ended March 31, 2017, Delta Air Lines' revenue slipped 1% to $9.15 billion compared to revenue of $9.25 billion in Q1 FY16. The Company's revenue numbers lagged behind the analysts' consensus of $9.20 billion.
Delta Air Lines' net earnings fell to $603 million, or $0.82 per share, for Q1 2017 compared to earnings of $946 million, or $1.21 per share, in Q1 FY16. Excluding non-recurring items, the Company reported adjusted earnings of $0.77 per share, topping Wall Street's estimates of $0.75 per share.
Operating Performance
For Q1 2017, Delta Air Lines' total passenger revenue declined 1% to $7.69 billion, including $20 million of lower hedge gains. Traffic increased 0.5% to 47.95 billion revenue passenger miles, while capacity or available seat miles contracted 0.5% to 57.87 billion available seat miles. During Q1 2017, Delta Air Lines' Load factor (percentage of seats filled by passengers) improved 80 basis points on a y-o-y basis to 82.9%. The Company's passenger revenue per available seat mile (PRASM) dipped 0.5% y-o-y to $0.13, while passenger mile yield declined 1.4% to $0.16.
Segment Results
For Q1 2017, Delta Air Lines' cargo sales of $160 million were down roughly 1% during the period which was all currency related. The Company noted that this was the best cargo result in eight quarters, and the Company posted sequential improvement through the quarter with cargo revenues up 12% year-over-year for the month of March.
Fuel Woes
During Q1 2017, Delta Air Lines' fuel expense increased by 26%, or $325 million, from the prior year. The Company's all-in fuel price of $1.71 per gallon was up almost 30% as crude prices climbed roughly $20 per barrel compared to Q1 2016 low levels. On the other hand, Delta Air Lines'refinery posted a $44 million profit in the reported quarter, lowering the Company's all-in jet fuel price by $0.05 in the March quarter. Delta Air Lines' expects that the refinery will contribute $100 million for the year in lower fuel prices.
For Q2 2017, Delta Air Lines' is forecasting an all-in fuel price in the range of $1.68 to $1.73 per gallon, which is down roughly 13% mainly due to last year's hedging activity.
Balance Sheet
During Q1 2017, for the first time in nearly 20 years, Delta Air Lines issued unsecured investment-grade debt. The Company issued $2 billion of 3- and 5-year notes at a blended rate of just under 3.3%. The Company noted that all of these proceeds have been put into its pension plan, which lowers its pension expense significantly in 2017.
Delta Air Lines' adjusted net debt increased to $8.8 billion the reported quarter, driven by debt issuance as well as seasonal liquidity. Excluding the accelerated pension funding, the Company generated $675 million of operating cash flow this quarter. In Q1 2017, Delta Air Lines' CapEx spending was $1.4 billion, which included $620 million for its strategic investment in Aeromexico as the Company successfully completed its cash tender offer.
For Q2 2017, Delta Air Lines currently expects CapEx of approximately $1.2 billion, which includes about $175 million to exercise the derivatives necessary to complete its purchase for a 49% stake in Grupo Aeromexico.
In Q1 2017, Delta Air Lines' also returned $350 million to shareholders, paying $149 million in dividends and $200 million in share repurchases.
Stock Performance
At the close of trading session on Monday, April 24, 2017, Delta Air Lines' stock price climbed 2.81% to end the day at $46.81. A total volume of 12.51 million shares were exchanged during the session. The Company's share price has gained 13.88% in the past six months. The stock is trading at a PE ratio of 8.68 and has a dividend yield of 1.73%. Moreover, the stock currently has a market cap of $34.08 billion.
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