Delta Air Lines earnings jump 572%, but DAL shares fall on Q1 forecast

Delta Airlines ( DAL ) handily beat fourth-quarter profit estimates on Friday while supporting its full-year 2023 growth forecast. But DAL shares fell on soft first-quarter guidance.


Delta earnings kicks off quarterly results for airlines and the overall travel sector. Delta was a peer American Airlines Group ( AAL ) issued bullish guidance early in the 4th quarter on Thursday. AAL shares rose after Thursday’s session.

Delta Air Lines earnings

Estimates: Analysts polled by FactSet expect Delta’s earnings to grow 502% year over year to $1.32. That would be slightly below the company’s upwardly revised guidance for Q4 EPS of $1.35 to $1.40 per share on Dec. 14. Total revenue increased 36% to $12.919 billion. But it will mark the sixth straight quarter of slowing sales growth.

Results: Earnings rose nearly 573% to $1.48. Total revenue rose 42% to $13.435 billion.

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Delta grew passenger revenue 6% to $10.89 billion, beating the consensus target of $10.6 billion.

Outlook: Delta Air Lines on Friday maintained its outlook for “significant” growth in 2023, including $5-6 EPS and more than $2 billion in free cash flow.

It expects revenue to grow by 15-20% for the full year.

Analysts polled by FactSet now expect 2023 EPS to rise 64% to $5.26. They see revenue up 14.2% for the full year.

“As we move into 2023, the industry backdrop for air travel remains favorable and Delta is well positioned to deliver significant earnings and free cash flow growth,” CEO Ed Bastian said in an earnings release.

He added that the company is on track to achieve EPS of more than $7 in 2024.

But CFO Dan Jankey lowered expectations for a 2023 start.

“For the March quarter, we expect non-fuel unit costs to increase 3% to 4% year-over-year, including the full-quarter impact of higher labor costs and the completion of our network restructuring for the peak summer period,” he said. he said.

Based on these forecasts, Delta estimated Q1 EPS of 15 cents to 40 cents. Wall Street now expects 59 cents.

DAL stock

Shares of Delta Air Lines fell 3.5% to 38.23 in trading on Friday, near session highs. DAL shares posted a seven-day rally that saw the stock break above its 50-day and 200-day moving averages to its best level since June 2022.

DAL stock is forming the right side of a deep cup base with a buy point of 46.37.

American Airlines Management

Earlier Thursday, American raised its Q4 guidance, citing strong demand and higher airfares. The airline now expects revenue to grow 16-17% from Q4 2019. This is more than the previous level of 11-13%. It predicts that revenue per available seat mile will increase by 24% from 2019.

The carrier now expects earnings of $1.12 to $1.17 per share. This is 50-70 cents more than before. The analyst consensus is targeting 61 cents, according to FactSet.

The company will announce the results on January 26.

AAL shares rose 1.1% on Friday after rising 9.7% on Thursday. Stocks rose sharply from their lows in late December and posted a third straight weekly advance. On Tuesday, the airline’s shares regained support at their 200-day moving average for the first time since May.

United Airlines (UAL) extended its seven-day winning streak by gaining 0.8% on Friday. Southwest Airlines ( LUV ) rose 0.1%, still below major averages after holiday travel chaos stranded passengers and gave the carrier a black eye.

United is due to report earnings on January 17 after the market closes. Southwest is set to watch Jan. 26 before the market opens.

Airline Stocks: Delta’s Recovery

In late 2022, Delta and other airlines sounded positive about the continued recovery in demand for commercial travel. In contrast, other industrial companies warned of the risk of recession.

Amid higher inflation, consumers are “preferring to invest in themselves and their experiences,” Delta CEO Ed Bastian told CNBC in December. Airlines and the wider travel industry are expected to benefit from this product-centric trend.

As with other airlines throughout the Covid-19 pandemic, Delta Air Lines has suffered a number of losses. Delta earned $1.70 per share in 4Q19 before posting six consecutive quarters of no earnings. In 2020, revenue is down more than 60%.

Delta is expected to return to annual earnings growth in 2022. Both leisure and business travel continue to recover, the carrier said last fall. International travel, particularly to Europe, has been particularly strong, he added.

Airlines have been broadly optimistic about travel demand. But some airline analysts worry about price hikes, including airfares, as the risk of a recession rises.

Carriers face higher fuel costs and pilot shortages. They have cut some routes and scaled back capacity expansion, while supply constraints have delayed the delivery of new aircraft.

The US airline industry returned to profitability in 2022 as post-pandemic travel is highlighted by the busy summer travel season.


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