Delta Airlines (NYSE: DAL) earnings release for the 1st quarter of their 2020 fiscal year
Category: Stock Market and Delta Airlines
Date: 24 April 2020 Stock Price: $22.48 We take a look at the 1st quarter earnings report of their 2020 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. But with the Covid-19 pandemic spreading across the world flights both locally and internationally has ground to a halt, leading to serious worries about whether airline companies can survive the current operating environment. Most will probably need a bail out or issue debt to push up cash reserves to get through this difficult period.
|
About Delta Airlines
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' 1st quarter 2020 earnings report
Data below is reported for the latest quarter unless stated otherwise
- Revenue: $11.4389 billion (up from $10.742 billion for the same quarter of the previous year)
- Revenue increased by 6% over the last 12 months
- Operating expenses: $10.040 billion (up from $9.652 billion for the same quarter of the previous year)
- Operating expenses increased by 4% over the last 12 months
- Net earnings: $1.099 billion (up from $1.019 billion for the same quarter of the previous year)
- Diluted earnings per share: $1.71 (up from $1.49 for the same quarter of the previous year)
- Dividend declared: $0.4025
- Dividend yield: 2.96%
- Diluted weighted-average shares outstanding: 644 million (down from 683 million for the same quarter of the previous year)
- Cash and cash equivalents: $2.882 billion
- Cash and cash equivalents per share: $4.47
- Cash and cash equivalents makes up 7.5% of Delta Airlines' market capital
- Cash and cash equivalents makes up 4.46% of Delta Airlines' total assets
- Accounts receivable: $2.854 billion
- Accounts receivable makes up 4.42% of Delta Airlines' total assets
- Goodwill: $9.781 billion
- Goodwill makes up 15.15% of Delta Airlines' total assets
- Goodwill per Delta Airlines stock: $15.18
- Stockholders equity of Delta Airlines' : $15.440 billion
- Stockholders equity per share: $23.97
- So Delta Airlines is trading at 2.48 times its stockholders equity per share. This is within the expected range of between 2 and 4 most firms tend to trade at
- Long term debt of Delta Airlines: $8.873 billion
- Long term debt makes up 30.7% of Delta Airlines total liabilities
- Cash generated from operations by Delta Airlines for the 4th quarter: $969 billion
- Cash generated from operations per share for the 4th quarter: $1.50
Delta Airlines' management commentary on their 1st quarter 2020 earnings report
ATLANTA, April 22, 2020 – Delta Air Lines (NYSE:DAL) today reported financial results for the March quarter 2020 and outlined its response to the COVID-19 global pandemic. “These are truly unprecedented times for all of us, including the airline industry. Government travel restrictions and stay-at-home orders have been effective in slowing the spread of the virus, but have also severely impacted nearterm demand for air travel, reducing our expected June quarter revenues by 90 percent, compared to a year ago” said Ed Bastian, Delta’s chief executive officer. “Delta is taking decisive action to prioritize the safety of our employees and customers while protecting our business and bolstering liquidity. I am especially proud of the incredible work the Delta people are doing to keep our nation’s airways open, playing an active role in the fight against the virus.”
ATLANTA, April 22, 2020 – Delta Air Lines (NYSE:DAL) today reported financial results for the March quarter 2020 and outlined its response to the COVID-19 global pandemic. “These are truly unprecedented times for all of us, including the airline industry. Government travel restrictions and stay-at-home orders have been effective in slowing the spread of the virus, but have also severely impacted nearterm demand for air travel, reducing our expected June quarter revenues by 90 percent, compared to a year ago” said Ed Bastian, Delta’s chief executive officer. “Delta is taking decisive action to prioritize the safety of our employees and customers while protecting our business and bolstering liquidity. I am especially proud of the incredible work the Delta people are doing to keep our nation’s airways open, playing an active role in the fight against the virus.”
ATLANTA, April 22, 2020 – Delta Air Lines (NYSE:DAL) today reported financial results for the March quarter 2020 and outlined its response to the COVID-19 global pandemic. “These are truly unprecedented times for all of us, including the airline industry. Government travel restrictions and stay-at-home orders have been effective in slowing the spread of the virus, but have also severely impacted nearterm demand for air travel, reducing our expected June quarter revenues by 90 percent, compared to a year ago” said Ed Bastian, Delta’s chief executive officer. “Delta is taking decisive action to prioritize the safety of our employees and customers while protecting our business and bolstering liquidity. I am especially proud of the incredible work the Delta people are doing to keep our nation’s airways open, playing an active role in the fight against the virus.”
Response to COVID-19
Network and Customer Experience
Community Response
Delta and its 90,000 employees are taking an active role in our nation’s fight against the virus by:
Expense Management
The company expects June quarter total expenses to decline by approximately 50%, or $5 billion, over prior year due to reduced capacity, lower fuel and cost initiatives, including:
Balance Sheet, Cash and Liquidity
“With the significant impact of COVID-19 on Delta’s revenue, we were burning $100 million per day at the end of March. Through our decisive actions, we expect that cash burn to moderate to approximately $50 million per day by the end of the June quarter,” said Paul Jacobson, Delta’s chief financial officer. “The decade of work we put into the balance sheet to lower debt and build unencumbered assets has been critical to our success in raising capital and we expect to end the June quarter with approximately $10 billion in liquidity.”
Network and Customer Experience
- To address the challenges of COVID-19, the company is taking the following actions:
- Making significant capacity reductions for the June quarter versus prior year with total system capacity down 85 percent, including domestic down by 80 and international capacity down by 90 percent
- Adopting new cleaning procedures on all flights, including fogging on all aircraft overnight and sanitizing high-touch areas like tray tables, entertainment screens, armrests and seat-back pockets before boarding
- Taking steps to help employees and customers practice social distancing, including blocking middle seats, pausing automatic upgrades, modifying our boarding process and moving to essential meal service only
- Extending 2020 Medallion Status an additional year, rolling Medallion Qualification Miles into 2021, and extending Delta SkyMiles American Express Card benefits and Delta Sky Club memberships
- Giving customers flexibility to plan, re-book and travel including extending expiration on travel credits to two years
Community Response
Delta and its 90,000 employees are taking an active role in our nation’s fight against the virus by:
- Offering free flights to medical professionals fighting COVID-19 in the hardest-hit areas of the U.S.
- Chartering international cargo-only flights to provide healthcare workers with materials needed to do their jobs
- Operating charters and specially approved scheduled flights to nations around the world to repatriate more than 28,000 people displaced by the virus to the U.S. 2
- Manufacturing tens of thousands of face shields and masks at Delta Flight Products to aid healthcare workers
- Partnering with the U.S. military to develop and manufacture secure, sterile transport pods at Delta TechOps, which will safely transit infected personnel to hospitals and medical centers
- Donating over 200,000 pounds of food to hospitals, first responders, community food banks, and organizations including Feeding America
Expense Management
The company expects June quarter total expenses to decline by approximately 50%, or $5 billion, over prior year due to reduced capacity, lower fuel and cost initiatives, including:
- Parking more than 650 aircraft
- Consolidating airport facilities, with temporary concourse and Delta Sky Club closures
- Instituting a company-wide hiring freeze and offering voluntary leave options with 37,000 employees taking short-term unpaid leave • Reducing salary expense through pay reductions for executive management and reduced work schedules across organization
Balance Sheet, Cash and Liquidity
- Delta's top financial priority remains preserving cash and enhancing liquidity. Accordingly, the company has taken the following actions:
- Raised $5.4 billion of capital since early March, including securing a $3.0 billion secured term loan, closing $1.2 billion in aircraft sale leasebacks, issuing $1.1 billion in AA, A and B tranches of our 2020-1 Enhanced Equipment Trust Certificates (EETC), and funding $150 million in private aircraft mortgages to enhance liquidity and satisfy maturing obligations
- Drew down $3 billion under existing revolving credit facilities
- Reduced planned capital expenditures by more than $3 billion, including working with original equipment manufacturers to optimize the timing of our future aircraft deliveries and deferring aircraft mods, IT initiatives, and ground equipment refreshment
- Extended payment terms with airports, vendors and lessors • Suspended shareholder returns, including the Company’s stock repurchase program and future dividend payments
“With the significant impact of COVID-19 on Delta’s revenue, we were burning $100 million per day at the end of March. Through our decisive actions, we expect that cash burn to moderate to approximately $50 million per day by the end of the June quarter,” said Paul Jacobson, Delta’s chief financial officer. “The decade of work we put into the balance sheet to lower debt and build unencumbered assets has been critical to our success in raising capital and we expect to end the June quarter with approximately $10 billion in liquidity.”
Delta Airlines (NYSE: DAL) stock price history
The image below, obtained from Google, shows the stock price history of Delta Airlines (NYSE: DAL) over the last 5 years. And it's been a pretty good time for Delta Airlines' stockholders. 5 years ago it was trading at around $47 and its currently trading at around $22.48 a stock. That's a significant loss of -52.2% suffered by Delta Airlines stockholders over the last 5 years.
The stock of Delta Airlines is trading at closer to its 52 week low of $19.10 than it is to its 52 week high of $63.44 which to us is a clear indication that the short term sentiment and momentum of Delta Airlines' stock is very negative at this point in time. It is not surprising considering that the airline and travel industry has basically grounded to a halt in recent months. Pair that to a significant stock market sell off due to Covid-19 and its a lethal cocktail for DAL's stock price. Read more about the stock market sell off here
The stock of Delta Airlines is trading at closer to its 52 week low of $19.10 than it is to its 52 week high of $63.44 which to us is a clear indication that the short term sentiment and momentum of Delta Airlines' stock is very negative at this point in time. It is not surprising considering that the airline and travel industry has basically grounded to a halt in recent months. Pair that to a significant stock market sell off due to Covid-19 and its a lethal cocktail for DAL's stock price. Read more about the stock market sell off here
Searches for DAL stock price spikes
The graphic below from Google Trends shows the searches for DAL stock price over the last 12 months. And as the graphic shows there has been a significant spike in the search results of DAL stock price since middle February. As the stock price plummets as shown above, searches for DAL stock price increased. Guess investors are worried about whether DAL will survive considering the woes in the travel and airline industry right now. Or bargain investors are looking for details on DAL's stock and whether it represents a good buy or not?
Recent coverage of Delta Airlines
The extract below discusses the latest results from Delta Airlines as obtained from Investorplace,com
Multiple positive signs and green shoots are emerging for airlines, including Delta Air Lines Stock (NYSE:DAL). As these positive signs and green shoots strengthen, DAL stock will likely rebound. One of the deterrents to flying, even for people who are ready and willing to do so, has been that there’s been very little to do anywhere in the country for the last month. Why would someone fly if the only places open at his or her destination are grocery stores and Walmart (NYSE:WMT)? Meanwhile, the lack of hotels, many of which have closed, has also been a serious deterrent to traveling.
But the situation looks like it’s changing a bit. A beach in Jacksonville, Florida recently opened, Dallas has opened its craft stores, and Texas has opened its state parks and authorized all retailers to provide curbside pickup service. Even New York, New Jersey, and Connecticut opened their marinas. At the beginning of May, after the CDC’s novel coronavirus warning expires, the economy will really start to open up. Among the states that look poised to implement the first phase of President Donald Trump’s reopening plan at that point are Texas, Arizona, Alabama, Ohio, Florida, Idaho, Mississippi, Montana, Oklahoma, South Carolina, and Utah.
Read the full article here
Multiple positive signs and green shoots are emerging for airlines, including Delta Air Lines Stock (NYSE:DAL). As these positive signs and green shoots strengthen, DAL stock will likely rebound. One of the deterrents to flying, even for people who are ready and willing to do so, has been that there’s been very little to do anywhere in the country for the last month. Why would someone fly if the only places open at his or her destination are grocery stores and Walmart (NYSE:WMT)? Meanwhile, the lack of hotels, many of which have closed, has also been a serious deterrent to traveling.
But the situation looks like it’s changing a bit. A beach in Jacksonville, Florida recently opened, Dallas has opened its craft stores, and Texas has opened its state parks and authorized all retailers to provide curbside pickup service. Even New York, New Jersey, and Connecticut opened their marinas. At the beginning of May, after the CDC’s novel coronavirus warning expires, the economy will really start to open up. Among the states that look poised to implement the first phase of President Donald Trump’s reopening plan at that point are Texas, Arizona, Alabama, Ohio, Florida, Idaho, Mississippi, Montana, Oklahoma, South Carolina, and Utah.
Read the full article here
Delta Airlines (NYSE: DAL) latest stock valuation
So what is Delta Airlines' stock worth based on the release of their latest earnings report provided by Delta Airlines? Based on the latest earnings results, and the difficult period ahead for DAL our valuation models provide a target price (full value price) for Delta Airlines at $82.90 a Delta Airlines stock (down significantly from our 4th quarter 2019 earnings report valuation of Delta Airlines).
We therefore believe that the stock is undervalued at its current price of $59.49
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $82.90. Therefore we see a good entry point into Delta Airlines stock at $74.60 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 $59.49
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $82.90. Therefore we see a good entry point into Delta Airlines stock at $74.60 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 2020 earnings report in middle April 2020