Delta Air Lines (DAL +3%) is trading at a new all-time high premarket after the company posted strong fourth quarter results and raised fiscal 2018 EPS guidance due to tax reform.
Delta's operating revenue of $10.2 billion for the December quarter was up 8.3%. Total unit revenues excluding refinery sales increased 4.4% for the December quarter. Passenger revenue increased $527 million, including $200 million from Delta's Branded Fares initiatives. Passenger unit revenues increased 4.2%, including 0.5 points from one-time revenue adjustments, on 2.3% higher capacity.
"We enter 2018 with significant momentum and every entity delivering positive passenger unit revenue for the first time in five years, driven by a robust demand environment and improving business fares," said Glen Hauenstein, Delta's president.
Much of this data was preannounced at the Investor Day last month.
The company gave its initial guidance for the first quarter. EPS guidance for the first quarter of $0.60-0.80/share was a little light and the 2.5-4.5% unit revenue guidance was consistent with its prior message.
At the Investor Day, Delta gave EPS guidance for the following year for the first time ever. Managment wanted to convey visibility for its business. Today, the company raised that guidance to reflect tax reform. Delta raised fiscal 2018 EPS guidance to $6.35-6.70 from $5.35-5.70 and reaffirmed top-line growth of 4-6%. For 2018, Delta expects the reduction in the corporate tax rate will result in an all-in book tax rate for the company of 22-24%. The company income tax provision for 2017 indicates a 37% tax rate (unclear if that is apples-to-apples).
The stock is trading at a new all-time high near $58 premarket, giving the stock a P/E ratio of ~9x, roughly half of the S&P 500 earnings multiple.