How Did Delta Perform In Q1?

by Trefis Team
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DAL
Delta Air Lines
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Delta Air Lines (NYSE:DAL) managed to post very good revenue figures despite falling short of the consensus estimate this time around. Revenues in the quarter jumped by almost 8% bringing the top line figure in around $9.76 billion. The top line was boosted by strong demand across all sectors and improving business and leisure yields. In contrast, despite marginally beating the consensus estimate, the airline’s earnings came in roughly 4% lower than the year ago figure, coming in around $547 million. As expected, the earnings figure in the quarter was hurt on higher fuel expenses that jumped by almost 20% from the same period last year.

Since the beginning of the year, the company’s value has declined by about 5%. That said, we believe the current price to be quite undervalued.

In this respect, we have revised our previous estimate, and created a scenario on an existing interactive dashboard analysis to estimate Delta’s latest valuation based on its expected revenue for FY 2018. Click on the link to modify the figures to arrive at your own price estimate.

Highlights:

  • As mentioned above, the company’s top line flourished in the quarter on the back of increased demand and higher yield per passenger. In fact, the by-gone quarter marked the highest revenue ever recorded for any previous March quarter. In addition, the company is seeing its strongest revenue momentum since 2014. This improvement was only possible thanks to heavy growth across all geographical areas, strong cargo results, and consistent double-digit growth in loyalty revenues. Management is quite certain that these trends are likely to continue through 2018 as well.
  • In terms of unit revenues, the company’s TRASM (Total Revenue per Available Seat Mile) was up by almost 5% in the quarter, with positive PRASM (Passenger Revenue per Available Seat Mile) growth across all entities. In general, domestic passenger revenue was up by almost 7%. This helped the domestic entity to deliver its fourth consistent quarter of year over year improvement, with PRASM up almost 2.5%.
  • Turning to costs, the company posted a heavy $817 million rise in total operating expenses in the quarter. More than a third of this increase was due to the sharp rise in oil prices, which is currently trading close to $70 per barrel. Another heavy contributor to the jump in operating expenses are higher capacity and revenue related costs. That said, the costs are expected to taper out through the remainder of the year as the company annualizes prior year investments, and gains benefits from their upgauging and One Delta initiatives.

 

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