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Delta (DAL) Slides on Q2 Earnings Miss & Lackluster Q3 View
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Delta Air Lines (DAL - Free Report) has reported second-quarter 2024 earnings (excluding 35 cents from non-recurring items) of $2.36 per share, which marginally missed the Zacks Consensus Estimate of $2.37. Earnings decreased 11.9% on a year-over-year basis. Apart from high costs, the carrier blamed the discounting pressure at the low end of the market, which hurt its pricing power, for the disappointing performance.
Revenues of $16.65 billion surpassed the Zacks Consensus Estimate of $16.25 billion and increased 6.9% year over year, driven by upbeat air travel demand. Adjusted operating revenues (excluding third-party refinery sales) came in at $15.41 billion, up 5.4% year over year.
The airline gave a bearish earnings per share view for the September quarter. Management expects adjusted earnings per share between $1.70 and $2 for the third quarter. The Zacks Consensus Estimate is pegged at $2.06 per share. The second-quarter earnings miss and the below-par third-quarter outlook displeased investors. As a result, the stock lost value in early trading.
Coming back to the second-quarter earnings report, passenger revenues, which accounted for 83.1% of the total revenues, rose 5% year over year to $13.84 billion, beating our estimate of $13.75 billion. Domestic passenger revenues grew 5% year over year. Passenger revenues improved 4% on the international front.
Cargo revenues increased 16% year over year to $199 million. The figure surpassed our estimate of $149.8 million. Other revenues increased 19% to $2.62 billion. The figure beat our estimate of $2.38 billion.
Other Aspects of Q2 Earnings Report
The adjusted operating margin was 14.7% compared with 17.1% a year ago.
Below, we present all figures (in percentage terms) in comparison with second-quarter 2023 results.
Revenue passenger miles (a measure of air traffic) increased 7%. Capacity (measured in available seat miles) expanded 8%. Load factor (percentage of seats filled by passengers) decreased to 87% from 88%. The figure was in line with our estimate.
Passenger revenues per available seat mile declined 3% to 18.54 cents. Passenger mile yield tumbled to 21.22 cents from 21.72 cents. On an adjusted basis, total revenues per available seat mile declined 2.6% to 20.64 cents. The figure was lower than our estimate of 20.97 cents.
Total operating expenses, including special items, increased 10% to $14.39 billion. Salaries and related costs hiked 9% to $4 billion. The increase was due to higher wages arising from the contract with pilots that was ratified in March 2023.
Fuel gallons consumed jumped 7% to $1.07 billion. Average fuel price per gallon (adjusted) increased 5% to $2.64. Non-fuel unit cost inched up 0.6% to 13.14 cents.
DAL exited the second quarter of 2024 with cash and cash equivalents of $4.11 billion compared with $2.74 billion at the end of 2023. The company had an adjusted net debt of $19.2 billion, a reduction of $2.3 billion from the end of 2023. The adjusted operating cash flow in the June quarter was $2.5 billion, with a gross capital expenditure and a free cash flow of $1.2 billion and $1.3 billion, respectively.
Remaining Aspects of Outlook
The adjusted operating margin in the September quarter is expected to be 11-13%. Management projects third-quarter 2024 total revenues (adjusted) of $14.8-$15.1 billion, indicating an increase of 2-4% from the prior-year quarter's actual. Available seat miles in the September quarter are envisioned to increase 5-6% from the year-ago actual. Non-fuel unit costs in the third quarter of 2024 are likely to increase 1-2%. Third-quarter 2024 fuel price per gallon is suggested to be $2.6-$2.8.
DAL, currently carrying a Zacks Rank #3 (Hold), expects adjusted earnings of $6-$7 per share for 2024. The Zacks Consensus Estimate is pegged at $6.50, in line with the mid-point of the company's guided range. For 2024, the adjusted free cash flow is expected to be $3-$4 billion.
Price Performance
Shares of Delta have declined 5.9% in the past three months against the industry’s 1.9% growth.
SkyWest currently carries a Zacks Rank #2 (Buy) and has an expected earnings growth rate of 787% for the year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 101% in the past year.
KEX sports a Zacks Rank #1 (Strong Buy) at present. Kirby has an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 10.3%. Shares of Kirby have climbed 57.2% in the past year.
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Delta (DAL) Slides on Q2 Earnings Miss & Lackluster Q3 View
Delta Air Lines (DAL - Free Report) has reported second-quarter 2024 earnings (excluding 35 cents from non-recurring items) of $2.36 per share, which marginally missed the Zacks Consensus Estimate of $2.37. Earnings decreased 11.9% on a year-over-year basis. Apart from high costs, the carrier blamed the discounting pressure at the low end of the market, which hurt its pricing power, for the disappointing performance.
Revenues of $16.65 billion surpassed the Zacks Consensus Estimate of $16.25 billion and increased 6.9% year over year, driven by upbeat air travel demand. Adjusted operating revenues (excluding third-party refinery sales) came in at $15.41 billion, up 5.4% year over year.
The airline gave a bearish earnings per share view for the September quarter. Management expects adjusted earnings per share between $1.70 and $2 for the third quarter. The Zacks Consensus Estimate is pegged at $2.06 per share. The second-quarter earnings miss and the below-par third-quarter outlook displeased investors. As a result, the stock lost value in early trading.
Coming back to the second-quarter earnings report, passenger revenues, which accounted for 83.1% of the total revenues, rose 5% year over year to $13.84 billion, beating our estimate of $13.75 billion. Domestic passenger revenues grew 5% year over year. Passenger revenues improved 4% on the international front.
Cargo revenues increased 16% year over year to $199 million. The figure surpassed our estimate of $149.8 million. Other revenues increased 19% to $2.62 billion. The figure beat our estimate of $2.38 billion.
Other Aspects of Q2 Earnings Report
The adjusted operating margin was 14.7% compared with 17.1% a year ago.
Below, we present all figures (in percentage terms) in comparison with second-quarter 2023 results.
Revenue passenger miles (a measure of air traffic) increased 7%. Capacity (measured in available seat miles) expanded 8%. Load factor (percentage of seats filled by passengers) decreased to 87% from 88%. The figure was in line with our estimate.
Passenger revenues per available seat mile declined 3% to 18.54 cents. Passenger mile yield tumbled to 21.22 cents from 21.72 cents. On an adjusted basis, total revenues per available seat mile declined 2.6% to 20.64 cents. The figure was lower than our estimate of 20.97 cents.
Total operating expenses, including special items, increased 10% to $14.39 billion. Salaries and related costs hiked 9% to $4 billion. The increase was due to higher wages arising from the contract with pilots that was ratified in March 2023.
Fuel gallons consumed jumped 7% to $1.07 billion. Average fuel price per gallon (adjusted) increased 5% to $2.64. Non-fuel unit cost inched up 0.6% to 13.14 cents.
DAL exited the second quarter of 2024 with cash and cash equivalents of $4.11 billion compared with $2.74 billion at the end of 2023. The company had an adjusted net debt of $19.2 billion, a reduction of $2.3 billion from the end of 2023. The adjusted operating cash flow in the June quarter was $2.5 billion, with a gross capital expenditure and a free cash flow of $1.2 billion and $1.3 billion, respectively.
Remaining Aspects of Outlook
The adjusted operating margin in the September quarter is expected to be 11-13%. Management projects third-quarter 2024 total revenues (adjusted) of $14.8-$15.1 billion, indicating an increase of 2-4% from the prior-year quarter's actual. Available seat miles in the September quarter are envisioned to increase 5-6% from the year-ago actual. Non-fuel unit costs in the third quarter of 2024 are likely to increase 1-2%. Third-quarter 2024 fuel price per gallon is suggested to be $2.6-$2.8.
DAL, currently carrying a Zacks Rank #3 (Hold), expects adjusted earnings of $6-$7 per share for 2024. The Zacks Consensus Estimate is pegged at $6.50, in line with the mid-point of the company's guided range. For 2024, the adjusted free cash flow is expected to be $3-$4 billion.
Price Performance
Shares of Delta have declined 5.9% in the past three months against the industry’s 1.9% growth.
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector are SkyWest (SKYW - Free Report) and Kirby Corporation (KEX - Free Report) .
SkyWest currently carries a Zacks Rank #2 (Buy) and has an expected earnings growth rate of 787% for the year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 101% in the past year.
KEX sports a Zacks Rank #1 (Strong Buy) at present. Kirby has an expected earnings growth rate of 42.5% for the current year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has an encouraging record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 10.3%. Shares of Kirby have climbed 57.2% in the past year.