Delta Air Lines easily beat fourth-quarter earnings estimates Friday, while backing full-year 2023 growth outlook. But DAL stock fell on soft first-quarter guidance.
The Delta earnings kick off quarterly results for airlines and the overall travel sector. Delta peer American Airlines Group gave bullish Q4 guidance early Thursday. AAL stock advanced Friday after jumping Thursday.
Delta Air Lines Earnings
Estimates: Analysts polled by FactSet expect Delta earnings to skyrocket 502%, year over year, to $1.32 per share. That would be just below the company's upwardly revised guidance given on Dec. 14 for Q4 EPS of $1.35 to $1.40 a share. Total revenue is seen growing 36% to $12.919 billion. But that would mark the sixth straight quarter of slowing sales growth.
Results: Earnings vaulted nearly 573% to $1.48 per share. Total revenue surged 42% to $13.435 billion.
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Delta grew passenger revenue 6% to $10.89 billion, topping the $10.6 billion consensus target.
Outlook: On Friday, Delta Air Lines maintained outlook for "significant" growth in 2023, including EPS of $5-$6 and free cash flow of more than $2 billion.
It expects to grow revenue for the full year 15%-20%.
Analysts polled by FactSet now expect 2023 EPS to increase 64% to $5.26, at the low end of company guidance. They see revenue for the full year growing 14.2%.
"As we move into 2023, the industry backdrop for air travel remains favorable and Delta is well positioned to deliver significant earnings and free cash flow growth," CEO Ed Bastian said in the earnings release.
The company is on track to achieve EPS of more than $7 in 2024, he added.
But CFO Dan Janki tempered expectations for the start of 2023.
"For the March quarter, we expect non-fuel unit costs to increase 3% to 4% year-over-year, including a full quarter impact from labor cost increases and finalizing the rebuild of our network for the peak summer period," he said.
Based on those forecasts, Delta guided Q1 EPS of 15 cents-40 cents. Wall Street now expects 59 cents.
DAL Stock
Shares of Delta Air Lines fell 3.5% to 38.23 in Friday's stock market action, closing near session highs. DAL stock snapped a seven-day rally that has taken shares above the 50-day and 200-day moving averages, to the best level since June 2022.
DAL stock is building the right side of a deep cup base with a 46.37 buy point.
American Airlines Guidance
Early Thursday, American lifted Q4 guidance, citing robust demand and high airfares. The airline now expects revenue to rise 16%-17% from Q4 2019. That is up from prior guidance of 11%-13%. It projects revenue per available seat mile will jump 24% from 2019 vs. a prior forecast for 18%-20%.
The carrier now expects earnings per share of $1.12-$1.17. That is up from 50 cents-70 cents prior. Analyst consensus targets 61 cents, according to FactSet.
The company is set to report results on Jan. 26.
AAL stock climbed 1.1% Friday after soaring 9.7% Thursday. Shares are up sharply from a late December low and scored a third straight weekly advance. The airline stock on Tuesday retook support at its 200-day moving average for the first time since May.
United Airlines gained 0.8% Friday, extending a seven-day win streak. Southwest Airlines edged up 0.1%, still below key averages after holiday travel chaos left passengers stranded and gave the carrier a black eye.
United is due to report earnings Jan. 17 after the market close. Southwest is set to follow Jan. 26 before the market open.
Airline Stocks: Delta's Recovery
In late 2022, Delta and other airlines sounded upbeat about the ongoing recovery in commercial travel demand. In contrast, companies in other industries warned of recession risk ahead.
Amid higher inflation, consumers are "prioritizing investing in themselves and experience," Delta CEO Ed Bastian told CNBC in December. Airline companies and the broader travel industry are expected to benefit from this trend favoring experiences over products.
As with other airlines throughout the Covid-19 pandemic, Delta Air Lines posted a string of losses. Delta earned $1.70 per share in Q4 2019 before posting six straight unprofitable quarters. Revenue plunged more than 60% in 2020.
Delta is expected to return to annual earnings growth in 2022. Both leisure and business travel continue to recover, the carrier said last fall. International travel, especially to Europe, has been particularly strong, it added.
Airlines have been broadly upbeat about travel demand. But some airline stock analysts worry about price increases — including airfares — as the recession risk grows.
The carriers also face higher fuel costs and pilot shortages. They have cut some routes and scaled back capacity expansion, while supply constraints have delayed deliveries of new aircraft.
The U.S. airline industry returned to profitability in 2022 as travel rebounded after the pandemic, highlighted by a busy summer travel season.
