Delta Air Lines has reported Q1 financial results that fell short of expectations, with the airline giant posting a net loss of $363m or 57 cents per share. However, the outlook for the key summer travel months appeared to be more positive, with Delta forecasting a healthy profit in Q2, citing “record” bookings for summer travel, including strong demand for international trips.[0] Delta’s Q1 numbers showed a strong rebound from weakness during the early part of the COVID-19 pandemic, with operating revenue for the quarter coming in at $11.8 billion, up 45% YoY and 14% higher than during the same period in 2019 before the pandemic began.[0] Delta also posted adjusted net income of $163m, reversing a sizable year-earlier loss.[0] Despite the loss, Delta ended the quarter with a record $12.8 billion in revenue, a 36% YoY increase.[1]
Despite missing expectations for adjusted earnings in Q1, Delta’s forecast for Q2 and the rest of the year remains optimistic, with the company reiterating its 2023 forecast for adjusted earnings in the region of $5 to $6 per share, nearly double its 2022 tally, with revenue gains of between 15% and 20%, thanks to what it described as a sustained surge in travel demand, falling jet fuel prices, and a decline in non-fuel operating costs. Based on Zacks estimates, Delta’s earnings are forecasted to climb 61% this year at $5.17 per share compared to EPS of $3.20 in 2022. Fiscal 2024 earnings are expected to leap another 32% to $6.84 per share.[2]
Delta’s strong outlook for the summer travel season has been attributed to a surge in demand for air travel, following a slowdown during the first few years of the pandemic. The passenger revenue for the current quarter was double that of the corresponding quarter in 2022.[3] Delta is also benefiting from the fact that business travel demand has fully recovered compared to pre-pandemic levels, with small and midsize businesses leading the way for the airline.[0] While larger corporate sales have not yet matched 2019 levels, most of the companies surveyed anticipate maintaining or increasing their travel activity in the coming months.[0]
Delta’s strong financial results and optimistic forecast have been well received by investors, with Delta shares up 2.5% in pre-market trading.[4] The airline’s direct competitors, American Airlines and United Airlines, also saw their shares rise by 2.1% and 2.9%, respectively.[5] Lufthansa shares also made a small upward leap following the Delta news and were last quoted up 1.6%.[5]
0. “These 2 Industrial Stocks Just Set the Stage for Earnings Season” The Motley Fool, 13 Apr. 2023, https://www.fool.com/investing/2023/04/13/these-2-industrial-stocks-just-set-the-stage-for-e/
1. “Delta loses $363m in first quarter as revenue and costs surge” Flightglobal, 13 Apr. 2023, https://www.flightglobal.com/strategy/delta-loses-363m-in-first-quarter-as-revenue-and-costs-surge/152834.article
2. “Can Delta or United Airlines Stock Takeoff This Earnings Season?” Zacks Investment Research, 11 Apr. 2023, https://www.zacks.com/stock/news/2077150/can-delta-or-united-airlines-stock-takeoff-this-earnings-season
3. “Delta Air Lines takes quarterly loss despite record revenue” The Business Journals, 13 Apr. 2023, https://www.bizjournals.com/atlanta/news/2023/04/13/delta-air-lines-march-2023-loss.html
4. “Delta Travel Outlook Lifts Airline Stocks, But Fuel, Wage Costs Weigh On Q1 Profits” Rockdale Newton Citizen, 13 Apr. 2023, https://www.rockdalenewtoncitizen.com/arena/thestreet/delta-travel-outlook-lifts-airline-stocks-but-fuel-wage-costs-weigh-on-q1-profits/article_f46fe3fb-8ee6-59e3-aed2-bee7661acba4.html
5. “Business outlook of Delta Air Lines pulls sector with high” Marketscreener.com, 13 Apr. 2023, https://www.marketscreener.com/quote/stock/LUFTHANSA-436827/news/Business-outlook-of-Delta-Air-Lines-pulls-sector-with-high-43485821/