Delta Airlines (DAL) earnings release for the 4th quarter of their 2021 fiscal year
Category: Delta Airlines (DAL)
Date: 15 January 2022 Stock Price of Delta (DAL): $40.31 Market Capital of Delta (DAL): $25.8 billion We take a look at the 4th quarter earnings report of their 2021 fiscal year of Delta Airlines, a U.S global airline company that used to have over 5000 departing flights on a daily basis across the world. For the quarter the group reported revenues of $9.47 billion and reported a net loss of $408 million.
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2021 was a year like no other for Delta, with significant progress in our recovery supported by growing brand preference, enabling us to be the only major U.S. airline to deliver profitability across the second half of the year - Ed Bastian, Delta's chief executive officer"
About Delta Airlines (DAL)
Delta Air Lines (NYSE: DAL) is the U.S. global airline leader in products, services, innovation, reliability and customer experience. Powered by its 80,000 people around the world, Delta continues to invest in its people, improving the air travel experience and generating industry-leading shareholder returns.
Headquartered in Atlanta, Delta offers more than 5,000 daily departures and as many as 15,000 affiliated departures including the premier SkyTeam alliance, of which Delta is a founding member. Delta serves nearly 200 million people every year, taking customers across its industry-leading global network to more than 300 destinations in over 50 countries.
Headquartered in Atlanta, Delta offers more than 5,000 daily departures and as many as 15,000 affiliated departures including the premier SkyTeam alliance, of which Delta is a founding member. Delta serves nearly 200 million people every year, taking customers across its industry-leading global network to more than 300 destinations in over 50 countries.
Overview of Delta Airlines 3rd quarter 2021 earnings report
December Quarter 2021 Financial Results
- Adjusted pre-tax income of $170 million excludes a net impact of $564 million primarily in equity method losses, mark-to-market adjustments on investments and special profit-sharing payment
- Adjusted operating revenue of $8.4 billion, which excludes third-party refinery sales, was 74 percent recovered versus December quarter 2019 on capacity that was 79 percent restored
- Total operating expense decreased $833 million compared to the December quarter 2019. Adjusted for costs from third-party refinery sales, total operating expense decreased $1.9 billion or 19% percent in the December quarter 2021 versus the comparable 2019 period
- Remuneration from American Express in the quarter was $1.2 billion, up 11 percent compared to the December quarter 2019
- At the end of the December quarter, the company had $14.2 billion in liquidity, including cash and cash equivalents, short-term investments and undrawn revolving credit facilities
Delta Airlines' management commentary on their 4th quarter 2021 earnings
ATLANTA, Jan. 13, 2022 /PRNewswire/ -- Delta Air Lines (NYSE:DAL) today reported financial results for the December quarter and full year 2021 and provided its outlook for the March quarter 2022. Highlights of the December quarter and full year 2021 results, including both GAAP and adjusted metrics, are on page five and are incorporated here.
"2021 was a year like no other for Delta, with significant progress in our recovery supported by growing brand preference, enabling us to be the only major U.S. airline to deliver profitability across the second half of the year," said Ed Bastian, Delta's chief executive officer. "As always, our people drove this success, which is why we were happy to announce this morning a special profit-sharing payment for all eligible employees."
"While the rapidly spreading omicron variant has significantly impacted staffing levels and disrupted travel across the industry, Delta's operation has stabilized over the last week and returned to pre-holiday performance," Bastian said. "Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel."
"2021 was a year like no other for Delta, with significant progress in our recovery supported by growing brand preference, enabling us to be the only major U.S. airline to deliver profitability across the second half of the year," said Ed Bastian, Delta's chief executive officer. "As always, our people drove this success, which is why we were happy to announce this morning a special profit-sharing payment for all eligible employees."
"While the rapidly spreading omicron variant has significantly impacted staffing levels and disrupted travel across the industry, Delta's operation has stabilized over the last week and returned to pre-holiday performance," Bastian said. "Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel."
Revenue Environment
"The commercial strengths we spoke about last month at Capital Markets Day are evident in our December quarter results. We ended December with revenues nearly 80 percent recovered to 2019 levels on strong demand and pricing during the holiday period, our premium products continued to perform well, we saw encouraging trends in business and international travel and our diverse revenue streams remained resilient," said Glen Hauenstein, Delta's president.
"The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President's Day weekend forward. Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter."
Operating revenue, adjusted of $8.4 billion for the December quarter 2021 improved 2 percent, or $149 million from September quarter 2021. Compared to the same period in 2019, operating revenue, adjusted was 74 percent restored, in line with the company's mid-December guidance update on system capacity that was 79 percent restored compared to December quarter 2019 levels.
Compared to the September quarter 2021, system yields improved 7 percent on a system load factor decline of 2 points to 78 percent. As a result, total unit revenue, adjusted improved 6 percent sequentially.
Balance Sheet, Cash and Liquidity
"During 2021, we made significant progress restoring our balance sheet, reducing gross debt by $6 billion and fully funding our pension plans on a PPA basis," Janki said. "Reducing debt remains a top financial priority as operating cash flow improves to support the return of our balance sheet back to investment grade metrics by 2024."
At the end of the December quarter 2021, the company had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion and a weighted average interest rate of 4.2 percent.
Operating cash flow during the December quarter 2021 was $555 million. Free cash flow was negative $441 million for the quarter with gross capital expenditures reinvested in the business of $948 million.
The company's Air Traffic Liability was $6.4 billion at December quarter-end, approximately flat compared to the end of the September quarter.
Delta ended the December quarter with $14.2 billion in liquidity, including $2.9 billion in undrawn revolver capacity.
"The commercial strengths we spoke about last month at Capital Markets Day are evident in our December quarter results. We ended December with revenues nearly 80 percent recovered to 2019 levels on strong demand and pricing during the holiday period, our premium products continued to perform well, we saw encouraging trends in business and international travel and our diverse revenue streams remained resilient," said Glen Hauenstein, Delta's president.
"The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President's Day weekend forward. Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter."
Operating revenue, adjusted of $8.4 billion for the December quarter 2021 improved 2 percent, or $149 million from September quarter 2021. Compared to the same period in 2019, operating revenue, adjusted was 74 percent restored, in line with the company's mid-December guidance update on system capacity that was 79 percent restored compared to December quarter 2019 levels.
Compared to the September quarter 2021, system yields improved 7 percent on a system load factor decline of 2 points to 78 percent. As a result, total unit revenue, adjusted improved 6 percent sequentially.
Balance Sheet, Cash and Liquidity
"During 2021, we made significant progress restoring our balance sheet, reducing gross debt by $6 billion and fully funding our pension plans on a PPA basis," Janki said. "Reducing debt remains a top financial priority as operating cash flow improves to support the return of our balance sheet back to investment grade metrics by 2024."
At the end of the December quarter 2021, the company had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion and a weighted average interest rate of 4.2 percent.
Operating cash flow during the December quarter 2021 was $555 million. Free cash flow was negative $441 million for the quarter with gross capital expenditures reinvested in the business of $948 million.
The company's Air Traffic Liability was $6.4 billion at December quarter-end, approximately flat compared to the end of the September quarter.
Delta ended the December quarter with $14.2 billion in liquidity, including $2.9 billion in undrawn revolver capacity.
Delta Airlines (DAL) stock chart over the last 5 years
The image below shows the stock price history of Delta Airlines (DAL) over the last 5 years. And its not been a good time for Delta Airlines stockholders with the stock declining by -18.2% over the last 5 years. Not the type of returns investors would like to see but considering the impact of Covid-19 a loss of -18% doesn't seem that bad.
The stock of Delta Airlines is trading at close to the midpoint between its 52 week high and 52 week low which is an indication to us that the short term sentiment and momentum of Delta's stock is neutral at this point in time.
The stock of Delta Airlines is trading at close to the midpoint between its 52 week high and 52 week low which is an indication to us that the short term sentiment and momentum of Delta's stock is neutral at this point in time.
Delta (DAL) vs Southwest Airlines (LUV) vs American Airlines (AAL) stock over last 5 years
The image below shows the stock price performance of Delta Airlines (DAL), Southwestern (LUV) and American Airlines (AAL) over the last 5 years. As the image shows its been a pretty horrible time for the stocks of airline companies. Over the 5 year period all three these airline stocks lost investors money. Below the returns of the three airline stocks (sorted from best to worst performer)
- Southwest Airlines: -15.8%
- Delta Airlines: -18.2%
- American Airlines: -60.6%
Delta Airlines ( DAL) latest stock valuation
So what is Delta Airlines' stock worth based on the release of their 3rd quarter 2021 earnings report provided by Delta Airlines? Based on the latest earnings results, and the difficult period Delta is facing our valuation models provide a target price (full value price) for Delta Airlines at $61.40 a Delta Airlines stock (down slightly from our 3rd quarter 2021 earnings report valuation of Delta Airlines). Thus we forecast a stock price for Delta Airlines by January 2023 to be at $61.40
We therefore believe that the stock is undervalued at its current price of $40.30
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $61.40. Therefore we see a good entry point into Delta Airlines stock at $55.30 or below.
Since Delta Airlines is trading at well below our suggested entry point into the stock we rate Delta Airlines as a buy.
We therefore believe that the stock is undervalued at its current price of $40.30
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $61.40. Therefore we see a good entry point into Delta Airlines stock at $55.30 or below.
Since Delta Airlines is trading at well below our suggested entry point into the stock we rate Delta Airlines as a buy.
Next earnings release of Delta Airlines
It is expected that Delta Airlines will release their 1st quarter 2022 earnings report in middle April 2022