Delta Air Lines (DAL) preannounced fourth quarter results this morning.
Delta said fourth quarter passenger unit revenue grew 4%, resulting in an operating margin of 11%.
At the Investor Day on December 14, the company raised its unit revenue outlook to +4% from +2-3% and lowered its operating margin guidance to 11% from 11-13%. Unit revenue is growing in all geographic entities.
Delta said that strong revenue was offset by higher fuel costs, which came out to $1.92-1.97/gallon. Non-fuel unit costs including profit sharing are expected to be up ~5.5% . The company estimates the operational disruption of the Atlanta airport power outage that drive 1400 flight cancellations negatively impacted pre-tax income by $25-50 mln. Delta also expects a one-time charge of $150-200 million due to the Tax Cut and Jobs Act.
At the Investor Day, Delta gave earnings guidance for next year ($5.35-5.70/share) -- for the first time ever. Delta guided for positive unit revenue each quarter -- a key metric for airlines.
Management is trying to command a earnings higher multiple for the stock. Delta trades at 11x EPS estimates (next twelve months) vs. 12x for the five largest airlines, 17x for the S&P 500 transportation industry and 20x for S&P 500 Industrials.
Delta will likely announce first quarter results in two weeks, where second quarter unit revenue and operating margin guidance will be the main focus for investors.
Technically, the stock continues to struggle with the $56 level, just underneath its all-time highs.