Not even Irma and Harvey could blow Delta Air Lines, Inc. (NYSE: DAL) earnings off track in the third quarter. Despite major headwinds from the hurricanes, Delta reported third-quarter earnings and revenue beats on Wednesday but warned investors of an expensive fourth quarter ahead.
Delta reported earnings per share of $1.57 on revenue of $11.06 billion in the third quarter. Both numbers topped consensus analyst estimates of $1.53 and $11.03 billion, respectively.
Passenger unit revenue per available seat mile was up 1.9 percent on the quarter, and capacity increased by 1.6 percent. Delta was forced to cancel more than 2,000 flights due to Hurricane Irma alone.
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The overall growth in unit revenue was lead by Latin America, which gained 5.9 percent. Pacific region was the only region with negative unit revenue growth, down 3.1 percent on the quarter.
“Three of four entities reported positive unit revenues, and we see continued opportunity in business yields,” Delta President Glen Hauenstein says. “We expect fourth-quarter unit revenues to be up 2 percent to 4 percent with all entities in positive territory by year end.”
However, the company said it expects higher fuel costs to weigh on margins in the fourth quarter. Delta is guiding for fourth-quarter margins in the 11 to 13 percent range.
Buckingham Research analyst Dan McKenzie says unit revenue growth is a pleasant surprise.
“What caught our eye: a 1.6 percent improvement in domestic mainline PRASM on a 4.5 percent increase in capacity, which suggests the premium seating initiatives and basic economy are beginning to drive better results,” McKenzie writes, according to TheStreet. “Looking ahead, the Street should like DAL’s solid outlook.”
Delta stock climbed 0.7 percent in Wednesday trading, but airline stocks as a whole have had a good week so far. On Tuesday, Delta rivals United Continental Holdings ( UAL) and American Airlines Group ( AAL) provided Q3 guidance updates that topped market expectations, sending airline stocks soaring. United and American are expected to report earnings on Oct. 18.
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Buckingham Research has a “buy” rating and $65 price target for Delta stock.
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Delta Air Lines, Inc. (DAL) Navigates Hurricane Headwinds originally appeared on usnews.com
