Delta’s Solid Q3 Results Dinged by Outlook

October 10, 2019 by Paul Ausick

Delta Air Lines Inc. (NYSE: DAL) reported third-quarter 2019 results before markets opened Thursday. The airline reported adjusted earnings per share (EPS) of $2.32 on adjusted revenues of $12.6 billion. In the same period a year ago, Delta reported EPS of $1.80 on revenues of $11.95 billion. Third-quarter results also compare to the consensus estimates for EPS of $2.26 on revenues of $12.6 billion.

The airline guided fourth-quarter 2019 EPS in a range of $1.20 to $1.50 on a pretax margin of 9.5% to 11.5%. Unit revenue, excluding refinery sales, is forecast to rise 4% to 5%. Seating capacity is expected to rise by about 4.5% and consolidated available seat miles are forecast to rise by 4% to 5%.

Analysts are forecasting fourth-quarter EPS at $1.51 and revenues at $11.29 billion.

Delta CEO Ed Bastien said:

Demand for the Delta product remains healthy, positioning the company for a strong close to 2019 with expectations for more than 20% earnings growth, over $4 billion in free cash flow and a 5th year of pre-tax earnings over $5 billion.

Delta President Glen Hauenstein added:

Increased customer satisfaction is driving solid top-line performance — September quarter revenues grew to a record $12.6 billion and we expect December quarter revenues to grow more than five percent versus prior year. Strong demand and our customer-focused commercial initiatives are putting us on track to achieve a $3 billion increase in revenues this year, a pace of growth well in excess of GDP.

Delta does not have any Boeing 737 Max aircraft in its fleet and it has none on order, a point CEO Bastien made in a telephone interview with Reuters. Bastien attributed the quarter’s profit growth to “surprise” demand, partly due to picking up business from competitors suffering from the grounded Boeing jets.

The airline expects to add more employees, cutting into profits. That’s never popular with investors, who have responded Thursday morning by taking a bite out of Delta’s share price. Shares traded down about 3.5% to $52.074, in a 52-week range of $45.08 to $63.44 and the 12-month consensus price target is $67.94.