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Delta Air Lines Inc. (DAL - Free Report) kicked off the second-quarter earnings season in the airline space on a mixed note. The airline behemoth reported lower-than-expected revenues while earnings beat estimates in the quarter. The earnings beat pleased the investors. Consequently, shares of the company were up in early trading.
The Atlanta, GA-based carrier’s second-quarter earnings (excluding special items) of $1.47 per share beat the Zacks Consensus Estimate by 5 cents. Earnings also improved 15.7% on a year-over-year basis thanks to low fuel costs.
Operating revenues came in at $10,447 million, marginally short of the Zacks Consensus Estimate of $10,488 million. Revenues declined 2.4% from the year-ago figure mainly due to currency woes. The top line was hurt to the tune of $65 million by adverse foreign currency movements.
During the quarter, passenger revenues, cargo revenues and other revenues declined 1.8%, 20.3% and 3.6%, respectively, on a year-over-year basis. The average fuel price in the second quarter was $1.38 per gallon, down 18.8% year over year.
Operating Statistics
Revenue passenger miles (a measure of air traffic) went up 3% year over year to 56.41 billion. Capacity or available seat miles climbed 3.2% to 66 billion. Load factor (percentage of seats filled by passengers) declined 10 basis points year over year to 85.5% as traffic growth was outweighed by capacity expansion in the quarter. Passenger revenue per available seat mile (PRASM) declined 4.9% year over year to 13.59 cents mainly due to currency woes. Passenger mile yield declined 4.7% to 15.9 cents.
Operating Expenses
Total operating expenses, including special items, declined 3% year over year to $8,024 million. Consolidated unit cost or cost per available seat mile (CASM), including profit sharing, was flat during the quarter.
Liquidity
At the end of the second quarter of 2016, Delta had $1.66 billion in cash and cash equivalents and adjusted net debt of $6.78 billion. The company managed to reduce its net debt significantly from 2009 levels. Delta generated free cash flow of $1.6 billion and adjusted operating cash flow of $2.6 billion in the second quarter of 2016.
Dividend and Share Repurchase
Delta returned $1.1 billion to its shareholders through dividends ($103 million) and buybacks ($1 billion) in the quarter under review. We are impressed with the company’s efforts to return greater value to its shareholders. In May 2016, the company raised its cash quarterly dividend to over 20 cents per share (81 cents per share annualized), representing an increase of 50% over the previous quarterly payout of 13.5 cents per share (54 cents per share annualized). The carrier intends to complete its existing $5 billion share repurchase by May 2017, well ahead of schedule.
In the wake of the uncertainty arising from the Brexit vote last month, the carrier has decided to trim 6 points of the U.S. - U.K. capacity from its winter schedule. For the third quarter of 2016, the carrier expects operating margin in the range of 19% to 21%. The estimated fuel price, including taxes and hedges, is expected in the band of $1.52 to $1.57 per gallon for the third quarter. System capacity is expected to rise in the band of 1% to 2% on a year-over-year basis. Passenger unit revenue in the third quarter is projected to decline in the band of 4% to 6%.
Zacks Rank & Key Picks
Currently, Delta has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the airline space include Cathay Pacific Airways Ltd. (CPCAY - Free Report) , GOL Linhas Aereas Inteligentes S.A. and ANA Holdings Inc. (ALNPY - Free Report) . GOL and Cathay Pacific sport a Zacks Rank #1 (Strong Buy) while ANA Holdings carries a Zacks Rank #2 (Buy).
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Delta Air Lines (DAL) Q2 Earnings Beat, Stock Up
Delta Air Lines Inc. (DAL - Free Report) kicked off the second-quarter earnings season in the airline space on a mixed note. The airline behemoth reported lower-than-expected revenues while earnings beat estimates in the quarter. The earnings beat pleased the investors. Consequently, shares of the company were up in early trading.
The Atlanta, GA-based carrier’s second-quarter earnings (excluding special items) of $1.47 per share beat the Zacks Consensus Estimate by 5 cents. Earnings also improved 15.7% on a year-over-year basis thanks to low fuel costs.
Operating revenues came in at $10,447 million, marginally short of the Zacks Consensus Estimate of $10,488 million. Revenues declined 2.4% from the year-ago figure mainly due to currency woes. The top line was hurt to the tune of $65 million by adverse foreign currency movements.
During the quarter, passenger revenues, cargo revenues and other revenues declined 1.8%, 20.3% and 3.6%, respectively, on a year-over-year basis. The average fuel price in the second quarter was $1.38 per gallon, down 18.8% year over year.
Operating Statistics
Revenue passenger miles (a measure of air traffic) went up 3% year over year to 56.41 billion. Capacity or available seat miles climbed 3.2% to 66 billion. Load factor (percentage of seats filled by passengers) declined 10 basis points year over year to 85.5% as traffic growth was outweighed by capacity expansion in the quarter. Passenger revenue per available seat mile (PRASM) declined 4.9% year over year to 13.59 cents mainly due to currency woes. Passenger mile yield declined 4.7% to 15.9 cents.
Operating Expenses
Total operating expenses, including special items, declined 3% year over year to $8,024 million. Consolidated unit cost or cost per available seat mile (CASM), including profit sharing, was flat during the quarter.
Liquidity
At the end of the second quarter of 2016, Delta had $1.66 billion in cash and cash equivalents and adjusted net debt of $6.78 billion. The company managed to reduce its net debt significantly from 2009 levels. Delta generated free cash flow of $1.6 billion and adjusted operating cash flow of $2.6 billion in the second quarter of 2016.
Dividend and Share Repurchase
Delta returned $1.1 billion to its shareholders through dividends ($103 million) and buybacks ($1 billion) in the quarter under review. We are impressed with the company’s efforts to return greater value to its shareholders. In May 2016, the company raised its cash quarterly dividend to over 20 cents per share (81 cents per share annualized), representing an increase of 50% over the previous quarterly payout of 13.5 cents per share (54 cents per share annualized). The carrier intends to complete its existing $5 billion share repurchase by May 2017, well ahead of schedule.
DELTA AIR LINES Price, Consensus and EPS Surprise
DELTA AIR LINES Price, Consensus and EPS Surprise | DELTA AIR LINES Quote
Third-Quarter Guidance
In the wake of the uncertainty arising from the Brexit vote last month, the carrier has decided to trim 6 points of the U.S. - U.K. capacity from its winter schedule. For the third quarter of 2016, the carrier expects operating margin in the range of 19% to 21%. The estimated fuel price, including taxes and hedges, is expected in the band of $1.52 to $1.57 per gallon for the third quarter. System capacity is expected to rise in the band of 1% to 2% on a year-over-year basis. Passenger unit revenue in the third quarter is projected to decline in the band of 4% to 6%.
Zacks Rank & Key Picks
Currently, Delta has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the airline space include Cathay Pacific Airways Ltd. (CPCAY - Free Report) , GOL Linhas Aereas Inteligentes S.A. and ANA Holdings Inc. (ALNPY - Free Report) . GOL and Cathay Pacific sport a Zacks Rank #1 (Strong Buy) while ANA Holdings carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>