Delta Air Lines, Inc. (DAL), US Airways Group Inc (LCC): The Positive Beat Continues for the Airlines

Page 1 of 2

Only a month ago this article theorized that airlines might finally be investable. Fortunately both Delta Air Lines, Inc. (NYSE:DAL) Airlines and US Airways Group Inc (NYSE:LCC) obliged the theory by reporting strong Q1 earnings. A quarter that is typically the weakest actually turned solidly profitable for two of the market leaders. In fact, Delta Air Lines, Inc. (NYSE:DAL) claimed the highest profit in over a decade.

Delta Air Lines, Inc. (NYSE:DAL)

Unless new competition comes out of left field or the unions get greedy by not being able to resist claiming a portion of all earnings gains, the sector could be poised for a golden decade.

Strong earnings from Delta

Delta Air Lines, Inc. (NYSE:DAL) reported a $124 million improvement in net income over last year by recording a net profit of $0.10 for Q1 2013. The company also generated $1.1 billion of operating cash flow and $457 million of free cash flow — an incredible turnaround from an industry that not only struggles with yearly profits and typically has a dismal first quarter.

The numbers were solidly above the analyst estimates of a profit of $0.06. Passenger revenue only increased by $107 million or 1.4%, but the company along with the sector continues to see operational improvements as passenger unit revenue (PRASM) increased by a solid 4.1%.

Analysts forecast earnings of around $2.60 this year increasing to $3 next year. Based on Q1 results, the stock is extremely cheap as the company easily surpassed earnings in the most difficult period of the year. As an example, analysts expect earnings jumping to $0.95 for the next quarter. These numbers have a higher probability of reaching the high-end estimate of $1.07 unless the furlough issue trips up the friendly skies.

Strong earnings from US Airways

US Airways Group Inc (NYSE:LCC) reported earnings of $55 million, or $0.31 per diluted share. This number easily surpassed analyst estimates of $0.28. The company is off to a solid start prior to the merger with AMR Corporation (NASDAQOTH:AAMRQ) scheduled to conclude in the third quarter. As with the sector and normal of an airline at any period, it lost $0.13 in the first quarter last year.

The company reported record load factors that should only improve with the consolidation of American Airlines. While first quarter revenue increased at a 3.4% clip, the difference maker is that efficiency increased as available seat miles only increased by 1.3%. The increased efficiency allowed the small revenue increase turn the small loss last year into a $77 million improvement this year.

Analysts forecast the company earning roughly $3 this year making the stock extremely cheap based on the ability to beat earnings going forward.

Fuel costs the key

A major key to substantial gains in the sector would be large drop in the price of jet fuel. As an example, US Airways Group Inc (NYSE:LCC) spent $1.13 billion on aircraft fuel in Q1. That amounts to 33% of the revenue spent on what most people consider a commodity.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!