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Delta (DAL) Up on Improved November PRASM Performance
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Shares of Delta Air Lines (DAL - Free Report) have been on an uptrend in recent times. The stock has comfortably outpaced the Zacks categorized Transportation-Airline industry over the last three months. The stock has gained almost 30% compared with the industry, which has advanced just 17.57% over the same period.
Continuing its trend of bullish performance, the Atlanta, GA-based airline behemoth delivered encouraging traffic report for November. The stock gained 1.13% on Dec 2, to close the trading session at $48.31 after the announcement. Delta’s consolidated revenue passenger miles (RPMs: a measure of air traffic) inched up 0.3% year over year in Nov 2016. Load factor (percentage of seats filled by passengers) climbed 90 basis points (bps) to 85%. The improvement in this important metric was due to traffic expansion and capacity (average seat miles or ASMs) contraction (0.7%), which lead to packed planes. The company registered a completion factor of 100% with 91.4% of its flights on schedule.
At the end of the first eleven months of 2016, Delta reported a 1.6% increase in RPMs to196.3 billion and 2.1% rise in ASMs to 232.15 billion, both on a year-over-year basis. Load factor decreased 50 bps to 84.5% as traffic growth was outpaced by capacity expansion.
Consolidated passenger unit revenue (PRASM) declined 1% year over year in the month. The performance was much better than October, when the metric declined 6.5%. “Stabilization of close in domestic yields” and the bullish unit revenue performance in Latin America contributed to the improvement. Investors should know that passenger yield refers to the average fare paid per mile by each passenger.
The carrier still expects unit revenues in the fourth quarter to decline in the band of 3–5%. Delta expects to return to positive unit revenue growth by early next year.
Margin Guidance Trimmed
The recently approved pilots’ contract will result in costs increasing in the fourth quarter to the tune of $475 million (including $380 million for the first three quarters of the year). Based on the estimated higher costs, Delta expects fourth-quarter operating margin in the band of 9.5% to 10.5% (earlier outlook had projected the metric in the band of 14% to 16%). The carrier said that excluding the impact of the contract the metric was expected in the high end of the 14% to 16% range.
The carrier also anticipates non-fuel unit costs including profit sharing to increase 10% in the current quarter, on a year-over-year basis.
We note that labor costs are surging not only at Delta but also at its peers like American Airlines Group (AAL - Free Report) and United Continental Holdings (UAL - Free Report) due to recent labor deals.
Zacks Rank
Delta Air Lines currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in the airline space is Copa Holdings (CPA - Free Report) , which sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here. The 2016 Zacks Consensus Estimate has increased 9 cents to $4.76 over the last month for Copa Holdings.
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Delta (DAL) Up on Improved November PRASM Performance
Shares of Delta Air Lines (DAL - Free Report) have been on an uptrend in recent times. The stock has comfortably outpaced the Zacks categorized Transportation-Airline industry over the last three months. The stock has gained almost 30% compared with the industry, which has advanced just 17.57% over the same period.
Continuing its trend of bullish performance, the Atlanta, GA-based airline behemoth delivered encouraging traffic report for November. The stock gained 1.13% on Dec 2, to close the trading session at $48.31 after the announcement. Delta’s consolidated revenue passenger miles (RPMs: a measure of air traffic) inched up 0.3% year over year in Nov 2016. Load factor (percentage of seats filled by passengers) climbed 90 basis points (bps) to 85%. The improvement in this important metric was due to traffic expansion and capacity (average seat miles or ASMs) contraction (0.7%), which lead to packed planes. The company registered a completion factor of 100% with 91.4% of its flights on schedule.
At the end of the first eleven months of 2016, Delta reported a 1.6% increase in RPMs to196.3 billion and 2.1% rise in ASMs to 232.15 billion, both on a year-over-year basis. Load factor decreased 50 bps to 84.5% as traffic growth was outpaced by capacity expansion.
Consolidated passenger unit revenue (PRASM) declined 1% year over year in the month. The performance was much better than October, when the metric declined 6.5%. “Stabilization of close in domestic yields” and the bullish unit revenue performance in Latin America contributed to the improvement. Investors should know that passenger yield refers to the average fare paid per mile by each passenger.
The carrier still expects unit revenues in the fourth quarter to decline in the band of 3–5%. Delta expects to return to positive unit revenue growth by early next year.
Margin Guidance Trimmed
The recently approved pilots’ contract will result in costs increasing in the fourth quarter to the tune of $475 million (including $380 million for the first three quarters of the year). Based on the estimated higher costs, Delta expects fourth-quarter operating margin in the band of 9.5% to 10.5% (earlier outlook had projected the metric in the band of 14% to 16%). The carrier said that excluding the impact of the contract the metric was expected in the high end of the 14% to 16% range.
The carrier also anticipates non-fuel unit costs including profit sharing to increase 10% in the current quarter, on a year-over-year basis.
We note that labor costs are surging not only at Delta but also at its peers like American Airlines Group (AAL - Free Report) and United Continental Holdings (UAL - Free Report) due to recent labor deals.
Zacks Rank
Delta Air Lines currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in the airline space is Copa Holdings (CPA - Free Report) , which sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here. The 2016 Zacks Consensus Estimate has increased 9 cents to $4.76 over the last month for Copa Holdings.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>