Delta Stock Soars on Strong Quarter

Delta Air Lines, Inc. (NYSE: DAL) stock cleared for takeoff on Thursday after the company reported better-than-expected fourth-quarter earnings and revenue and raised its full-year 2018 guidance.

Even after a 3.1 percent gain on Wednesday, Delta shares traded higher another 1.7 percent on Thursday.

Delta reported adjusted earnings per share of 96 cents on operating revenue of $10.2 billion. Both numbers topped consensus analyst estimates of 88 cents and $10.1 billion, respectively.

Passenger unit revenue per available seat mile was up 4.2 percent in the fourth quarter and 2.1 percent for 2017 as a whole. Capacity was up 2.3 percent on the quarter.

In addition, Delta raised its full-year 2018 EPS guidance from $6.35 to $6.70.

“Looking ahead to 2018, we expect to drive solid earnings growth by growing our top line 4 to 6 percent, improving our cost trajectory and integrating our international partner network,” CEO Ed Bastian said.

Delta President Glen Hauenstein said the company is expecting unit revenue growth of 2.5 to 4.5 percent in the first quarter of 2018.

“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,” Hauenstein said.

A December power outage at Atlanta Hartsfield-Jackson Airport and Winter Storm Benji cost Delta $60 million in income in the fourth quarter. The power outage forced more than 1,400 flight cancellations.

Management will likely discuss the impact of January’s Winter Storm Grayson, which caused airlines to cancel more than 4,000 flights in the opening days of 2018, on Delta’s earnings call Thursday morning.

JPMorgan analyst Jamie Baker says the winter storm may actually serve as a positive catalyst for Delta given that it hit after the holiday season. Baker says business travelers impacted by the storm are more likely to reschedule flights than holiday travelers would have been.

“The majority of corporate revenue related to cancellations will now simply be flown later in the quarter,” Baker said on CNBC. “The reality is that, with the stock market strong and with temperatures plummeting, consumers are likely to spend more, not less, on the upcoming spring break.”

Baker expects…

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