Delta Air Lines Beats First Period Expectations

Atlanta’s Delta Air Lines (NYSE: DAL – $57.85) reported better-than-expected first-quarter results, with adjusted earnings per share of $0.96 from $0.75 the year before and better than the Street views for $0.90. Operating revenue climbed 7.5% to $10.42 billion, just topping the Wall Street estimate for $10.41 billion. Total revenue per available seat mile (TRASM) was up by 2.4% year-on-year to $16.7 million in the first quarter, while the expense for fuel rose 4.6% to $1.97 billion and operating expenses were 5.7% higher at $9.4 billion. Earlier this month Delta signed an 11-year renewal of its credit-card partnership with American Express, saying it expects the benefit from the relationship to double to nearly $7 billion a year by 2023. For the second quarter that ends in June, Delta is looking for earnings of between $2.05 to $2.35 per share, which compares favorably to consensus estimates of $2.13.  It also expects total adjusted revenue growth of 6% to 8% year-on-year and TRASM up 1.5% to 3.5%. Management also guided full-year revenue growth of between 5% and 7%.

       Full year 2019 earnings are estimated by Wall Street at $6.58 per share and $7.09 is a good bet for 2020. As for the stock, the shares are suitable for aggressive investors with an eye on value. Fleet modernization, fare segmentation and effective cost control give confidence to Delta’s ability to continue growing earnings even if global economic growth rates moderate to a degree. The shares trade at a very reasonable valuation of 8.7 times this year’s projected earnings and provide a $1.40 per share dividend yielding 2.5% at current levels.


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