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Investing.com -- Delta Air Lines shares rallied more than 7% at the open on Thursday after the carrier reported third-quarter earnings that exceeded analyst expectations and raised its full-year outlook, citing improving travel demand and strong execution.
The airline posted adjusted earnings per share of $1.71 for the September quarter, beating analyst estimates of $1.53 by 18 cents. Revenue reached $15.2 billion, surpassing the consensus forecast of $15.04 billion and representing a 4.1% increase YoY.
The company now expects full-year adjusted earnings of approximately $6.00 per share, above analyst expectations of $5.77 and in the upper half of its previous guidance range.
"Delta’s competitive advantages and differentiation have never been more evident, and thanks to the hard work of our people, we continue to elevate the customer experience and extend our industry leadership," said Ed Bastian, Delta’s chief executive officer. "We delivered September quarter results at the top end of our expectations on a combination of strong execution and improving fundamentals."
The carrier’s diverse revenue streams contributed significantly to its performance, with premium revenue growing 9% YoY and loyalty revenue also increasing 9%. American Express remuneration reached $2 billion, up 12% from the previous year. Corporate sales rebounded, rising 8% compared to the same period last year.
For the December quarter, Delta forecasts operating margins between 10.5% and 12% with adjusted earnings per share of $1.60 to $1.90. The company expects total revenue growth of 2% to 4% over last year’s record performance.
Delta maintained its full-year free cash flow outlook of $3.5 billion to $4 billion, which aligns with its long-term targets. The airline has paid down nearly $2 billion in debt year-to-date, bringing its gross leverage to 2.4x at the end of the quarter.
The company’s non-fuel unit cost increased just 0.3% YoY during the quarter, while fuel expenses decreased 8% compared to the same period last year, with the average fuel price per gallon down 11%.
"Delta delivered better-than-expected third quarter earnings supported by a positive inflection in domestic US unit revenues," Barclays analysts said in a note reacting to the report. "Investors will focus on trans-Atlantic and domestic demand trends as management highlights strength in corporate,
premium products and loyalty."
Meanwhile, Bank of America told investors in a note that "4Q upside is just what was needed."
"We believe these results point to the structural changes happening across the industry and bode well for DAL as well as UAL when it reports next
week. We maintain our Buy rating on DAL," stated the bank’s analysts.