Delta Air Lines beats Q4 estimates but shares fall on 'underwhelming' profit guidance

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By Senad Karaahmetovic

Shares of Delta Air Lines (NYSE:DAL) are down more than 4.5% in pre-market Friday after the airline reported weaker-than-expected earnings per share (EPS) guidance for its first fiscal quarter.

Delta reported an adjusted EPS of $1.48 on revenue of $13.44 billion, which is ahead of Street’s expectations for earnings of $1.32 per share on revenue of $12.26B. The passenger load factor was 85%, missing the 86.1% consensus. Available seat miles came in at 59.51B, again below the estimate of 59.66B.

“As we move into 2023, the industry backdrop for air travel remains favorable and Delta is well positioned to deliver significant earnings and free cash flow growth. We expect to grow 2023 revenue by 15 to 20 percent and improve unit costs year-over-year, supporting a full-year outlook for earnings of $5 to $6 per share and keeping us on track to achieve more than $7 of earnings per share in 2024," CEO Ed Bastian said.

Delta stock was mostly hit after the airline said it expects FQ1 EPS to come in the range of $0.15-$0.40, a big miss compared to the consensus of $0.54. The guidance incorporates an estimate for a new pilot program.

Delta reiterated its full-year EPS guidance of $5-$6, ahead of the $5.07 consensus.

“While we remain positive on DAL shares (Buy-rated), and there will be level setting across the industry this year for higher labor rates, we expect shares to react negatively initially as the market digests the higher cost outlook given recent outperformance,” Goldman Sachs analysts said in a note.

Vital Knowledge analysts added:

“The airline industry continues to do well, and Delta’s qualitative commentary in the press release is bullish, but the Q4 numbers aren’t as good as American on Thurs (recall the AAL preannouncement helped to rally the whole group yesterday), and the Q1 outlook is a bit underwhelming.”