Delta Airlines
In turn, this led to a higher bar for the company to overcome with its upcoming earnings release especially as the company's Q1 guidance came in slightly below expectations. Another tailwind was the decline in oil prices which are now rebounding along with growth expectations and the Chinese economy moving past its zero-COVID policy. However, shares remain attractive given the company's forward P/E of 5.6, especially for investors with a strong conviction that the economy can evade a recession.
Inside the Numbers
In Q4, Delta Airlines reported earnings per share of $1.48 which exceeded analysts' expectations of $1.33 per share. Revenue also topped expectations at $12.3 billion vs $12.2 billion which excludes refinery revenue. Including this, the company had $13.4 billion in revenue which was 17% higher than its 2019 Q4 revenue.
However, the company's Q1 guidance came in below expectations as it sees earnings per share between $0.15 and $0.40 per share, while analysts' consensus forecast was significantly higher. It sees capacity increasing to 1% below pre-pandemic levels, while unit costs are expected to increase by 3% to 4% higher than in 2022, largely due to higher labor costs. For the full year, Delta expects earnings per share between $5 and $6 per share.
Overall in Q4, the company's capacity was 9% lower than pre-pandemic levels. Net income came in at $828 million which was below $1.1 billion in net income in Q4 of 2019. Some key differences in addition to lower capacity, between the two periods, are higher unit costs currently and higher prices which offset some of the lost revenue from fewer flights and higher per-unit costs. Compared to Q4 2019, operating costs were up 19%, while fuel costs were 42% higher.
The company also noted particular strength in premium offerings. Premium revenue, which includes first-class seats, was up 13%, outpacing the 8% gain from main cabin revenue.
