October 10, 2024 11:12 GMT
TRANSPORTATION: Delta kicks off airline earnings on a slight margin miss
TRANSPORTATION
Equities -6% in pre-market
Revenue, load factors and yields look in line but looks like slight miss on costs left EBIT at $1.4b on a adj. 9.4% margin - slight miss on consensus 10% and below its guidance for 11-13% - it has CrowdStrike linked outage driving a -2.3ppt impact on that. The read-through looks neutral - particularly given election impacts should be less for us - but earnings call may give more to go on;
- Atlantic yields were down -3% in-line with group. Real drag came from Pacific yields that were -13% - we assume indicative of a continued drag from oversupply in Asia.
- Trends it say improved in transatlantic through the qtr with a rebound in September as "Paris demand rebounded following the Olympics".
- Corporate sales up 7% (down from double digit growth last qtr). Survey indicates 85% of companies expect to increase travel spend in 2025 (down from 90% last qtr for the year ahead then). Premium revenue growth outpaced main cabin in both domestic and international.
- Macro; says consumers more cautious ahead of election and has a -1pt impact to unit revenues (~eqv. -5%) from reduced travel around that. Otherwise seeing strong bookings, which when paired with a pullback in domestic supply has CEO seeing demand & supply "in pretty good equilibrium".
- Leaves 4Q guidance identical to Q3 (revenue up +2-4%, EBIT margin of 11-13%) adding "with an improving industry backdrop and strong demand for travel on Delta, we are positioned to finish the year strong. We expect our December quarter pre-tax profit to grow 30 percent over last year to $1.4 billion, which would mark one of the most profitable fourth quarters in our history." - it is a miss on c$1.5b but does still point to a positive trend in margins to end the year.
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