|
Related Topics
|
Category: Stock Market and Delta Airlines
Date: 14 July 2020 Stock Price of Delta: $26.01 We take a look at the 2nd 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. Delta has made a -$3.8 billion pre tax loss.
|
A $3.9 billion adjusted pre-tax loss for the June quarter on a more than $11 billion decline in revenue over last year, illustrates the truly staggering impact of the COVID-19 pandemic on our business."
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' 2nd quarter 2020 earnings report
Data below is reported for the latest quarter unless stated otherwise
- Revenue: $1.47 billion (down from $12.53 billion for the same quarter of the previous year)
- Revenue decreased by -88% over the last 12 months
- Operating expenses: $6.283 billion (down from $10.408billion for the same quarter of the previous year)
- Operating expenses decreased by -40% over the last 12 months
- Net loss: -$5.7 billion (down from $.433 billion for the same quarter of the previous year)
- Diluted loss per share: -$9.01 (down from $2.21for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 635 million (down from 652 million for the same quarter of the previous year)
- Cash and cash equivalents: $11.366 billion
- Cash and cash equivalents per share: $17.89
- Cash and cash equivalents makes up 68.8% of Delta Airlines' market capital
- Cash and cash equivalents makes up 15.72% of Delta Airlines' total assets
- Accounts receivable: $1.375 billion
- Accounts receivable makes up 1.9% of Delta Airlines' total assets
- Goodwill: $9.753 billion
- Goodwill makes up 13.5% of Delta Airlines' total assets
- Goodwill per Delta Airlines stock: $15.36
- Stockholders equity of Delta Airlines' : $8.690 billion
- Stockholders equity per share: $13.68
- So Delta Airlines is trading at 1.9 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: $19.413 billion
- Long term debt makes up 30.5% of Delta Airlines total liabilities
- Cash used by operations of Delta Airlines for the 2nd quarter: -$290 million
Delta Airlines' management commentary on their 2nd quarter 2020 earnings report
ATLANTA, July 14, 2020 – Delta Air Lines (NYSE:DAL) today reported financial results for the June quarter 2020 and outlined its continued response to the COVID-19 global pandemic. Detailed June quarter 2020 results, including both GAAP and adjusted metrics, are on page four and are incorporated here
“A $3.9 billion adjusted pre-tax loss for the June quarter on a more than $11 billion decline in revenue over last year, illustrates the truly staggering impact of the COVID-19 pandemic on our business. In the face of this challenge, our people have acted quickly and decisively to protect our customers and our company, reducing our average daily cash burn by more than 70 percent since late March to $27 million in the month of June,” said Ed Bastian, Delta’s chief executive officer. “Given the combined effects of the pandemic and associated financial impact on the global economy, we continue to believe that it will be more than two years before we see a sustainable recovery. In this difficult environment, the strengths that are core to Delta’s business – our people, our brand, our network and our operational reliability – guide every decision we make, differentiating Delta with our customers and positioning us to succeed when demand returns.”
“A $3.9 billion adjusted pre-tax loss for the June quarter on a more than $11 billion decline in revenue over last year, illustrates the truly staggering impact of the COVID-19 pandemic on our business. In the face of this challenge, our people have acted quickly and decisively to protect our customers and our company, reducing our average daily cash burn by more than 70 percent since late March to $27 million in the month of June,” said Ed Bastian, Delta’s chief executive officer. “Given the combined effects of the pandemic and associated financial impact on the global economy, we continue to believe that it will be more than two years before we see a sustainable recovery. In this difficult environment, the strengths that are core to Delta’s business – our people, our brand, our network and our operational reliability – guide every decision we make, differentiating Delta with our customers and positioning us to succeed when demand returns.”
Update on COVID-19 Response
In response to the COVID-19 pandemic, the company has prioritized the safety of customers and employees, the preservation of financial liquidity and ensuring it is well positioned for recovery. Actions under these priorities include:
Protecting the health and safety of employees and customers
• Adoption of new cleaning procedures on all flights, including disinfectant electrostatic spraying on aircraft and sanitizing high-touch areas before each flight
• Taking steps to help employees and customers practice social distancing and stay safe, including requiring employees and customers to wear masks, blocking middle seats and capping load factor at 60 percent and modifying boarding and deplaning process
• Installing plexiglass shields at all Delta check-in counters, Delta Sky Clubs and gate counters, adding social distance markers in the check-in lobby, Delta Sky Clubs, at gate areas and in jet bridges
• Launching a Global Cleanliness organization dedicated to evolving Delta’s already high cleanliness standards, seeking to bring the same focus and rigor that has underpinned Delta’s reputation for unmatched operational reliability
• Providing COVID-19 testing for employees in partnership with the Mayo Clinic and Quest Diagnostics
• Giving customers flexibility to plan, re-book and travel including extending expiration on travel credits through September 2022. Delta has provided more than $2.2 billion in cash refunds in 2020
Preserving financial liquidity
• Raising nearly $15 billion in financing transactions since early March, at a blended average interest rate of 5.5 percent, including the unsecured loan portion received under the CARES Act payroll support program (“PSP”)
• Reducing cash burn (see Note A) throughout the June quarter with target to achieve breakeven cash burn by year end
• Amending credit facilities to replace all fixed charge coverage ratio covenants with liquidity-based covenants
• Extending maturities of $1.3 billion of borrowings under revolving credit facilities from 2021 to 2022
• Aggressively managing costs through lower capacity, reduced fuel expense and cost initiatives including reduced work schedules and voluntary employee leaves of absence, parking aircraft, consolidating facilities and eliminating nearly all discretionary spend
• Obtaining $5.4 billion of grant funds and unsecured loans through the PSP of the CARES Act to be paid in installments through July 2020
• Continuing to evaluate future financing opportunities by leveraging unencumbered assets. We are eligible and submitted a non-binding Letter of Intent to the U.S Treasury Department for $4.6 billion under the CARES Act secured loan program. The company has not yet decided whether it will participate and has the ability to elect participation until September 30, 2020
Defining Delta’s recovery path
• Positioning Delta to be a smaller, more efficient airline over the next several years by accelerating fleet simplification with the retirement of entire MD-88, MD-90, 777 and 737-700 fleets and portions of the 767- 300ER and A320 fleets in 2020
• Taking advantage of reduced demand to accelerate airport construction projects in Los Angeles, New-York LaGuardia and Salt Lake City, in an effort to shorten timelines and lower the total cost for the projects
• Launching voluntary separation and early retirement programs to proactively manage headcount and rescale operations. Programs provide cash severance, fully paid healthcare coverage, enhanced retiree healthcare for certain participants, and enhanced travel privileges to eligible employees who elect to participate
Balance Sheet, Cash and Liquidity
Delta ended the June quarter with $15.7 billion in liquidity. Cash used in operations during the quarter was $290 million. Daily cash burn averaged $43 million for the quarter with an average of $27 million for the month of June, a 70 percent decline from levels in late March. At the end of the June quarter, the company had total debt and finance lease obligations of $24.6 billion with adjusted net debt of $13.9 billion. During the quarter, the company raised $11 billion in new liquidity at a blended average rate of 6.5 percent. New financing completed during the quarter included $5.0 billion in slots, gates and routes secured financing, $2.8 billion in sale-leaseback transactions, $1.4 billion of the PSP loan, $1.3 billion in unsecured notes, $243 million in B tranches of Enhanced Equipment Trust Certificates (“EETCs”) and an additional $250 million on its 364-day secured term loan. At the end of the June quarter, the company’s Air Traffic Liability totaled $5.0 billion including a current liability of $4.7 billion and a non-current liability of $0.3 billion. The noncurrent Air Traffic Liability represents our current estimate of tickets to be flown, as well as credits to be used, beyond one year. Travel credits represent approximately 60 percent of the total Air Traffic Liability. “Our average daily cash burn has improved sequentially each month since March and we remain committed to achieving breakeven cash burn by the end of the year,” Jacobson continued.
"We successfully bolstered our liquidity to $15.7 billion at the end of June through new financings and CARES Act funding during the quarter, with adjusted net debt of $13.9 billion increasing by $3.4 billion since the beginning of the year. By raising cash early and aggressively managing costs, we are prepared to navigate what will be a volatile revenue period while making decisions that position Delta well for the eventual recovery.”
In response to the COVID-19 pandemic, the company has prioritized the safety of customers and employees, the preservation of financial liquidity and ensuring it is well positioned for recovery. Actions under these priorities include:
Protecting the health and safety of employees and customers
• Adoption of new cleaning procedures on all flights, including disinfectant electrostatic spraying on aircraft and sanitizing high-touch areas before each flight
• Taking steps to help employees and customers practice social distancing and stay safe, including requiring employees and customers to wear masks, blocking middle seats and capping load factor at 60 percent and modifying boarding and deplaning process
• Installing plexiglass shields at all Delta check-in counters, Delta Sky Clubs and gate counters, adding social distance markers in the check-in lobby, Delta Sky Clubs, at gate areas and in jet bridges
• Launching a Global Cleanliness organization dedicated to evolving Delta’s already high cleanliness standards, seeking to bring the same focus and rigor that has underpinned Delta’s reputation for unmatched operational reliability
• Providing COVID-19 testing for employees in partnership with the Mayo Clinic and Quest Diagnostics
• Giving customers flexibility to plan, re-book and travel including extending expiration on travel credits through September 2022. Delta has provided more than $2.2 billion in cash refunds in 2020
Preserving financial liquidity
• Raising nearly $15 billion in financing transactions since early March, at a blended average interest rate of 5.5 percent, including the unsecured loan portion received under the CARES Act payroll support program (“PSP”)
• Reducing cash burn (see Note A) throughout the June quarter with target to achieve breakeven cash burn by year end
• Amending credit facilities to replace all fixed charge coverage ratio covenants with liquidity-based covenants
• Extending maturities of $1.3 billion of borrowings under revolving credit facilities from 2021 to 2022
• Aggressively managing costs through lower capacity, reduced fuel expense and cost initiatives including reduced work schedules and voluntary employee leaves of absence, parking aircraft, consolidating facilities and eliminating nearly all discretionary spend
• Obtaining $5.4 billion of grant funds and unsecured loans through the PSP of the CARES Act to be paid in installments through July 2020
• Continuing to evaluate future financing opportunities by leveraging unencumbered assets. We are eligible and submitted a non-binding Letter of Intent to the U.S Treasury Department for $4.6 billion under the CARES Act secured loan program. The company has not yet decided whether it will participate and has the ability to elect participation until September 30, 2020
Defining Delta’s recovery path
• Positioning Delta to be a smaller, more efficient airline over the next several years by accelerating fleet simplification with the retirement of entire MD-88, MD-90, 777 and 737-700 fleets and portions of the 767- 300ER and A320 fleets in 2020
• Taking advantage of reduced demand to accelerate airport construction projects in Los Angeles, New-York LaGuardia and Salt Lake City, in an effort to shorten timelines and lower the total cost for the projects
• Launching voluntary separation and early retirement programs to proactively manage headcount and rescale operations. Programs provide cash severance, fully paid healthcare coverage, enhanced retiree healthcare for certain participants, and enhanced travel privileges to eligible employees who elect to participate
Balance Sheet, Cash and Liquidity
Delta ended the June quarter with $15.7 billion in liquidity. Cash used in operations during the quarter was $290 million. Daily cash burn averaged $43 million for the quarter with an average of $27 million for the month of June, a 70 percent decline from levels in late March. At the end of the June quarter, the company had total debt and finance lease obligations of $24.6 billion with adjusted net debt of $13.9 billion. During the quarter, the company raised $11 billion in new liquidity at a blended average rate of 6.5 percent. New financing completed during the quarter included $5.0 billion in slots, gates and routes secured financing, $2.8 billion in sale-leaseback transactions, $1.4 billion of the PSP loan, $1.3 billion in unsecured notes, $243 million in B tranches of Enhanced Equipment Trust Certificates (“EETCs”) and an additional $250 million on its 364-day secured term loan. At the end of the June quarter, the company’s Air Traffic Liability totaled $5.0 billion including a current liability of $4.7 billion and a non-current liability of $0.3 billion. The noncurrent Air Traffic Liability represents our current estimate of tickets to be flown, as well as credits to be used, beyond one year. Travel credits represent approximately 60 percent of the total Air Traffic Liability. “Our average daily cash burn has improved sequentially each month since March and we remain committed to achieving breakeven cash burn by the end of the year,” Jacobson continued.
"We successfully bolstered our liquidity to $15.7 billion at the end of June through new financings and CARES Act funding during the quarter, with adjusted net debt of $13.9 billion increasing by $3.4 billion since the beginning of the year. By raising cash early and aggressively managing costs, we are prepared to navigate what will be a volatile revenue period while making decisions that position Delta well for the eventual recovery.”
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
Delta (DAL) stock vs Southwest Airlines (LUV) vs American Airlines (AAL)
The image below shows the stock price performance of Delta Airlines (DAL), Southwestern (LUV) and American Airlines (AAL) over the last 3 years. As the image shows its been a pretty horrible time for the stocks of airline companies. Over the three 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: -40.2%
- Delta Airlines: -47.24%
- American Airlines: -77%
Recent coverage of Delta Airlines (DAL)
The extract below discusses the latest results from Delta Airlines as obtained from marketwatch.com
Delta Air Lines Inc. DAL, -2.75% stock fell nearly 1% in Tuesday premarket trading after the airline reported second-quarter losses that were wider than expected. Delta's net loss was $5.72 billion, or $9.01 per share, after net income of $1.44 billion, or $2.21 per share, last year. Adjusted losses were $4.43 per share. The FactSet consensus was for a loss of $4.16. Revenue totaled $1.47 billion, down from $12.54 billion last year but ahead of the FactSet consensus for $1.39 billion. Passenger revenue for the quarter fell 94% to $678 million, and cargo revenue was down 42% to $108 million. "Given the combined effects of the pandemic and associated financial impact on the global economy, we continue to believe that it will be more than two years before we see a sustainable recovery," said Delta Chief Executive Ed Bastian in a statement, emphasizing the "staggering impact of the COVID-19 pandemic on our business."
Delta ended the quarter with $15.7 billion in liquidity, and reduced its daily cash burn in June by 70% compared to late March, down to an average of $27 million. And the company has gotten $5.4 billion in grant funds and unsecured loans through the CARES Act, which will be paid in installments through July 2020. Maturities on $1.3 billion in borrowings on revolving credit facilities have been extended to 2022 from 2021. Delta has taken additional sanitation steps in the face of the coronavirus pandemic, has limited load factor at 60% and is blocking off middle seats. The company has provided more than $2.2 billion in cash refunds in 2020. Delta is positioning itself to be a smaller airline over the next couple of years, retiring MD-88 and other planes, and reducing headcount through early retirement and other programs. The company is also accelerating airport construction projects in New York's LaGuardia Airport, in Los Angeles and other cities. At the end of the quarter, the company had total debt and finance lease obligations of $24.6 billion.
Read the full article here
Delta Air Lines Inc. DAL, -2.75% stock fell nearly 1% in Tuesday premarket trading after the airline reported second-quarter losses that were wider than expected. Delta's net loss was $5.72 billion, or $9.01 per share, after net income of $1.44 billion, or $2.21 per share, last year. Adjusted losses were $4.43 per share. The FactSet consensus was for a loss of $4.16. Revenue totaled $1.47 billion, down from $12.54 billion last year but ahead of the FactSet consensus for $1.39 billion. Passenger revenue for the quarter fell 94% to $678 million, and cargo revenue was down 42% to $108 million. "Given the combined effects of the pandemic and associated financial impact on the global economy, we continue to believe that it will be more than two years before we see a sustainable recovery," said Delta Chief Executive Ed Bastian in a statement, emphasizing the "staggering impact of the COVID-19 pandemic on our business."
Delta ended the quarter with $15.7 billion in liquidity, and reduced its daily cash burn in June by 70% compared to late March, down to an average of $27 million. And the company has gotten $5.4 billion in grant funds and unsecured loans through the CARES Act, which will be paid in installments through July 2020. Maturities on $1.3 billion in borrowings on revolving credit facilities have been extended to 2022 from 2021. Delta has taken additional sanitation steps in the face of the coronavirus pandemic, has limited load factor at 60% and is blocking off middle seats. The company has provided more than $2.2 billion in cash refunds in 2020. Delta is positioning itself to be a smaller airline over the next couple of years, retiring MD-88 and other planes, and reducing headcount through early retirement and other programs. The company is also accelerating airport construction projects in New York's LaGuardia Airport, in Los Angeles and other cities. At the end of the quarter, the company had total debt and finance lease obligations of $24.6 billion.
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 2nd quarter 2020 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 $67.10 a Delta Airlines stock (down significantly from our 1st quarter 2020 earnings report valuation of Delta Airlines).
We therefore believe that the stock is undervalued at its current price of $26.01
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 $67.10. Therefore we see a good entry point into Delta Airlines stock at $60.40 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 $26.01
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 $67.10. Therefore we see a good entry point into Delta Airlines stock at $60.40 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 3rd quarter 2020 earnings report in middle October 2020