Delta Air Lines and peers slip after profit miss

Boarding1Now

Delta Air Lines (NYSE:DAL) traded just slightly lower in premarket action on Wednesday after missing Q2 estimates, but setting guidance above expectations.

The airline company sees revenue of $12.6B to $13.1B vs. $12.5B consensus. Delta Air Lines (DAL) also expects double digit operating margin in the quarter and meaningful full year profitability. Overall, DAL is on track to achieve 2024 targets of over $7 EPS and $4B of free cash flow.

Domestic continues to lead the recovery for Delta with international accelerating. During Q2, domestic passenger revenue was 3% higher than the pre-pandemic quarter three years ago and international passenger revenue was 81% recovered compared to that quarter.

Delta Air Lines (DAL) is starting to pay back debt, including $1B in Q2. At the end of the quarter, the balance sheet showed adjusted net debt of $19.6B with a weighted average interest rate of 4.3%. 84% of the debt is fixed rate and 16% variable rate.

"After the strong airline rally on Tues, this Delta release could prompt some selling, but investors will probably look through the Q2 EPS/OM miss," updated Vital Knowledge founder Adam Crisafulli on the sector reaction. United Airlines (UAL) dropped 0.99% and American Airlines Group (AAL) was off 0.81% in the early session.

Shares of DAL fell 1.16% premarket to $30.73 following the mixed earnings quarter.

Comments

[markcc]

Nobody posting to apologize this big profit miss. Stock down 7%. Obviously no excuse for their poor performance.

I do commend CEO Bastian for putting lipstick on this one on CNBC this morning but do criticize CNBCs Phil Lebeau for few tough questions and little follow-up when Bastian dodged the issues. Bastian did talk about the 82% of ASMs during the interview. Service frozen at June levels in Q3,

www.cnbc.com/...

[Tim Dunn]

@markcc
Delta's issue is with costs - the same costs that are not only affecting other airlines but also other companies.
Inflation is hurting businesses alongside inefficiencies of restarting operations.
Delta's advantage is that it is saving $200 million plus from its refinery per quarter - something American and United cannot replicate. Delta is also much more fuel efficient than AAL or UAL which means DAL's fuel cost will be lower than those 2 regardless of the price of fuel.
The only airline that might do much better will be Southwest and potentially Alaska where they MIGHT gain slightly better efficiencies AND have larger hedge gains.
The notion that Delta reported anything that isn't going to be endemic to the entire corporate earnings season is patently unsubstantiated.

[markcc]

@Tim Dunn
After years of refinery losses dragging on Delta's fuel prices, it finally gets a bump from increasing fuel prices.
American and United have avoided the losses, and if they thought it was valuable, can establish their own hedging operations which southwest has proven more valuable than a refinery.

All oil markets have downsides where prices drop and losses mount at refineries. Delta lost many billions on the last decline, way more than the $200 million you are bragging about.
If it was that good, the market would not be absolutely punishing it this morning.

[mhargra34]

DAL is dead money...

[Dukebailey]

@mhargra34 They increased guidance, and the share price is likely to move up in the near term. Worth a swing trade.

[mhargra34]

@Dukebailey People always think they can make money on airlines. Time usually proves them wrong...

[Dukebailey]

@mhargra34 I agree they don’t make good long term investments, but they are attractive to traders because of the volatility.