Delta Air Lines, Inc. (NYSE:DAL) is reaping the rewards of increased demand for air travel and a strong financial position, although the surge in fuel expenses presents a cause for concern.
Factors in Favor of DAL
Delta is capitalizing on a surge in air travel demand, particularly domestically, which has translated into positive results. Demonstrating this, DAL exceeded expectations for both earnings per share and revenue in the second quarter of 2023. The projected earnings for the third quarter are within the range of $2.2 to $2.5 per share, with an estimated adjusted operating margin in the mid-teens for the September quarter.
Furthermore, the company has elevated its outlook for earnings per share for the current year. Delta now forecasts adjusted earnings of $6 to $7 per share for 2023, up from the previous projection of $6. Anticipated 2023 total revenues (adjusted) are set to grow between 17% to 20% compared to the actual figures from 2022.
Delta’s financial liquidity position is reassuring. By the end of the second quarter of 2023, the airline had $6,611 million in cash and cash equivalents, significantly surpassing the current debt and financial lease maturities of $2,136 million. This indicates the company possesses ample resources to meet its existing debt obligations. Additionally, DAL’s commitment to debt repayment is a positive indicator.
Major Concerns
Rising fuel costs present a notable challenge to Delta’s profitability. The increase in oil prices is predominantly driven by supply worries stemming from Russia’s involvement in Ukraine. Despite a slight decrease from its previous highs, fuel prices remain notably elevated. The management’s projection places the fuel price per gallon (adjusted) within the range of $2.50 to $2.70 for the September quarter.
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