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Delta Air Lines’s 4Q14 earnings exceed consensus estimates

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Investor reaction to Delta’s 4Q14 results

The first airline to release its 4Q14 earnings, Delta Air Lines (DAL) started the earnings season on a positive note by exceeding consensus analyst earnings estimates. After it announced its fourth-quarter earnings, Delta’s share price rose by 7.3% on January 20, 2015. Plus, the airline index rose by 3% as share prices of all major US airlines increased.

According to the company, Delta was the sixth best performing stock in the S&P 500, with a 79% gain in 2014. It has the third highest free cash flow yield on the S&P Industrials, which allowed the company to provide better returns to shareholders. Plus, Delta’s market capitalization has increased by $30 million in two years. Named the 2014 Airline of the Year by Air Transport World magazine, Delta continues to strengthen its balance sheet with an aim to attain an investment-grade rating.

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Company overview

Delta Air Lines started operations in 1924 as the first commercial agricultural flying company, and the company initiated its first passenger service in 1929. One of the largest passenger and cargo airlines in the US, Delta serves ~165 million customers each year to 225 domestic and 97 international destinations.

Delta’s diversified network is supported by international joint ventures with Air France–KLM, Alitalia, Virgin Atlantic, and Virgin Australia. Alliances with domestic and foreign airlines also support Delta’s route network, including Alaska Airlines, Aeromexico, and Brazilian airline GOL. Delta has agreements with several regional carriers operating as Delta Connection, as well as membership with SkyTeam, a global airline alliance.

Domestic airlines

Delta Air Lines (DAL) is one of the top six US airlines, which account for 70% of domestic market share. The other leading US carriers include American Airlines (AAL), which merged with US Airways in 2013, United Continental (UAL), Southwest Airlines (LUV), and JetBlue Airways (JBLU). Refer to Investing in Delta Air Lines: A must-know company overview for additional details on Delta, including segment breakdown, key operating metrics, joint ventures, costs, margins, and returns for 2013.

Delta Air Lines is part of more than 70 ETFs. Some of the ETFS that hold more than 2% of their holdings in Delta Air Lines stock are the iShares Transportation Average ETF (IYT), the PowerShares DWA Consumer Cyclical Momentum Portfolio (PEZ), the PowerShares Dynamic Market Portfolio (PWC), and the SPDR S&P Transportation ETF (XTN).

In this series, we’ll see how Delta performed in the fourth quarter ending December 2014 in terms of growth in revenue and profitability, its financial position, improvements in 2014, and the outlook for 2015.

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