Delta beats expectations
Delta Airlines (DAL) stock was up 3% in premarket trading on April 10 after the company released better-than-expected earnings results for the first quarter of 2019. The company’s first-quarter adjusted EPS of $0.96 surpassed Wall Street analysts’ consensus estimate of $0.90 and marked its seventh consecutive quarter of positive earnings surprises.
Delta’s quarterly earnings also came in above the high end of its guidance range of $0.85–$0.95 and registered a whopping ~28% YoY (year-over-year) rise. Higher revenue, cost-cutting initiatives, and benefits from the early renewal of its credit card agreement with American Express (AXP) mainly drove the company’s first-quarter earnings higher.
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In the first quarter, Delta reported adjusted revenue of $10.5 billion, slightly higher than analysts’ consensus expectation of $10.4 billion. On a YoY basis, its revenue rose 7.5%, higher than its recently updated guidance of 7%. Higher unit revenue and double-digit sales growth in its premium products and non-ticket sources mainly drove the company’s first-quarter revenue.
Delta’s unit revenue for the quarter rose 2.4% primarily due to strong corporate demand and a benefit of approximately one point from its American Express agreement. The YoY growth in this key revenue metric was higher than its recently updated guidance of 2%.
Delta’s ex-fuel cost per available seat mile fell 0.2% mainly as a result of its fleet transformation, cost-control measures, and One Delta initiative. Its fuel cost per gallon of $2.05 remained within its management’s guidance range of $2.03–$2.08.
The company’s pretax margin expanded 150 basis points to 7.9% in the quarter from 6.4% in the previous year’s quarter mainly driven by higher revenues and lower costs. In an investor update on April 2, Delta revealed that its cost-control initiatives and higher completion factor had led to expansions in its first-quarter pretax margin and EPS.
During the quarter, the company generated $2 billion worth of operating cash flow and $760 million worth of free cash flow. Delta returned ~$1.6 billion to its shareholders in the form of dividends and share repurchases in the quarter.