Atlanta-based Delta Air Lines (NYSE: DAL – $47.09) pushed sales higher in the fourth quarter on gains in the leisure market and demand from corporate clients, but the carrier confirmed it couldn’t raise fares as much as it once hoped. The carrier said total sales in the final period of the year increased 5% compared to last year at $10.74 billion and slightly ahead of analyst’s views of $10.72 billion. Revenue from domestic flights increased 8% to $7.07 billion and a 7% increase from its trans-Atlantic flights led its international business. Latin American sales increased 4% and sales for flights over the Pacific gained 1%. Profit for the fourth quarter totaled $1.02 billion and adjusted earnings of $1.30 a share compared favorably to last year’s $0.96 surpassing the $1.27 a share that analysts expected. Operating expenses rose 6% to $9.65 billion in the quarter. The company’s aircraft fuel bill and related taxes jumped 29% to $2.32 billion and salaries rose 8% to $2.74 billion. Full year operating cash flow of $7.0 billion was used to invest in Delta’s business, strengthen its investment grade balance sheet and fund $2.5 billion of dividends and share repurchases
Looking ahead, for the first quarter ending in March, Delta is targeting per share earnings of $0.70 to $0.90, with unit revenue growth of no more than 2% due in part to the government shutdown, the timing of the Easter holiday and currency effects. Capacity is forecast to grow 4%. For the full-year, Delta expects double-digit earnings growth on higher revenues, cost growth that remains lower than inflation and a modest benefit from lower fuel prices and forecasts earnings of $6 to $7 per share, with the Street consensus at $6.66.
These beaten down shares look good for the long haul with a forward PE ratio of 7 times 2019 projected results. Disciplined capacity growth, cost containment, efficiency improvements, fleet modernization, and effective price hikes all augur well for long-term results.