Why Delta Air Lines Shares Are Diving Today

Delta Air Lines Inc (NYSE) shares are trading lower by ~5% Friday morning following the release of its fourth-quarter and fiscal 2023 results.

DAL reported a fourth-quarter FY23 operating revenue growth of 5.9% year-over-year to $14.22 billion and adjusted operating revenue of $13.66 billion (+11.1% Y/Y), beating the consensus of $13.52 billion. Adjusted EPS was $1.28 above the consensus of $1.17.

Total passenger revenue was $12.17 billion, a 12% increase YoY. Cargo revenue decreased 24% Y/Y to $188 million.

Delta recorded an adjusted operating income of $1.33 billion (-6.5% Y/Y), with an adjusted operating margin of 9.7%, down ~183 bps.

Adjusted operating expenses increased by 13.4% Y/Y to $12.33 billion, and non-fuel costs were $9.1 billion for the quarter.

Delta Air Lines generated an adjusted operating cash flow of $499 million in the quarter and $7.2 billion for the fiscal. Adjusted net debt at quarter-end decreased ~4% Y/Y to $21.42 billion.

Total revenue per available seat mile declined 8% Y/Y. The passenger load factor was 84% vs. 85% in the fourth quarter of 2022.

DAL reported liquidity of $6.8 billion at quarter-end, including $2.9 billion in undrawn revolver capacity.

Related: Delta Air Lines Gears Up For Q4 Print; Here’s A Look At Recent Price Target Changes By The Most Accurate Analysts

Adjusted average fuel price of $3.00 per gallon dropped 6.3% from last year’s quarter.

Full-year 2023 results highlights: Operating revenue of $54.7 billion (+20% YoY), Operating income of $6.3 billion with an operating margin of 11.6%, Earnings per share of $6.25, and Adjusted debt to EBITDAR of 3.0x, down from 5.0x at the end of 2022.

“In 2024, demand for air travel remains strong and our customer base is in a healthy financial position with travel a top priority. We expect to grow full year earnings to $6 to $7 per share and generate free cash flow of $3 to $4 billion, further strengthening our financial foundation,” commented Ed Bastian, Delta’s chief executive officer.

First-quarter 2024 Outlook: Delta Air Lines expects revenue growth of 3% – 6%; EPS of $0.25 – $0.50 versus $0.40 estimate; and operating margin of ~5% on an adjusted basis.

2024 Outlook: DAL sees EPS of $6 – $7 versus the $6.56 estimate, free cash flow of $3 billion-$4 billion and Adjusted Debt to EBITDAR of 2x – 3x, as an adjusted measure. In December 2022, DAL said it was on track for its 2024 earnings target of over $7 per share.

Additionally, DAL announced an agreement with Airbus SE EADSY to purchase twenty A350-1000s, with options for twenty additional widebody aircraft. The company also announced a service agreement to service its Trent XWB-97 engines.

Price Action: DAL shares are trading lower by 4.92% at $40.18 on Friday.

Photo via Wikimedia Commons