Why Delta Air Lines Stock Is Shooting Higher Today

Delta Air Lines Inc DAL reported a Q3 FY23 adjusted operating revenue growth of 13% Y/Y to $14.55 billion and operating revenue of $15.49 billion, beating the consensus of $14.54 billion.

Total passenger revenue was $13.1 billion, a 14% increase Y/Y. Cargo revenue decreased 36% Y/Y to $154 million.

Total revenue per available seat mile declined 5% Y/Y on GAAP and 2.5% Y/Y on an adjusted basis. The passenger load factor was 88% vs. 87% in Q3 FY22.

Delta recorded an adjusted operating income of $1.96 billion (+32% Y/Y), with an adjusted operating margin of 13.5% (+1.9ppt).

Adjusted operating expenses increased by 11% Y/Y to $12.59 billion, and non-fuel costs increased 18% Y/Y to $9.22 billion for the quarter.

Adjusted average fuel price dropped 21% Y/Y to $2.78 per gallon.

Adjusted EPS was $2.03 above the consensus of $1.94.

Delta Air Lines generated an adjusted operating cash flow of $1.13 billion, an increase of 45% Y/Y. Adjusted net debt at quarter-end stood at $20.16 billion.

DAL reported liquidity of $7.8 billion at quarter-end, including $2.8 billion in undrawn revolver capacity.

Q4 Outlook: Delta Air Lines expects revenue growth of 9% - 12%, adjusted EPS of $1.05 - $1.30 versus $1.11 estimate and an adjusted operating margin of 9% - 11%.

The company expects non-fuel unit costs to be flat to 2% higher Y/Y in Q4.

FY23 Outlook revised: DAL revised adjusted EPS to $6.00 - $6.25 (prior $6-$7) versus $6.04 estimate and expects revenue growth of ~20% (prior +17%-20%); adjusted operating margin of ~11.5% (vs. greater than 12% prior) and, and FCF of $2 billion (vs. more than $3 billion prior).

"Robust demand for travel on Delta is continuing into the December quarter where we expect total revenue growth of 9 percent to 12 percent compared to the December quarter 2022 with total unit revenue (TRASM) expected to decline 2.5 percent to 4.5 percent. Within this outlook, Domestic and Transatlantic trends are consistent with the September quarter on a year-over-year basis, while unit revenue trends in the Pacific and Latin America are expected to modestly decelerate given capacity growth related to China re-opening and investment in our LATAM JV," said Glen Hauenstein, Delta's president.

Price Action: DAL shares are trading higher by 3.17% at $37.12 premarket on the last check Thursday.