Delta Air Lines stock falls despite 2019 initial guidance

Delta Air Lines (DAL) stock fell over 4% just an hour of market close on Thursday as investors were unsatisfied with the company’s confidence in achieving its earnings and revenue target for the full year 2019. The airline provided its initial target for fiscal 2019 at its annual investor day held today in New York.

The company remained confident of achieving double-digit earnings growth of $6 to $7 per share in 2019 helped by the top-line growth of 4% to 6% and margin expansion with a 15% after-tax return on invested capital. The revenue growth will be benefited by its pipeline in commercial initiatives, brand momentum, rising diverse revenue stream, and premium product mix.

As the efficiency initiatives gain momentum and Delta’s fleet transformation continues, the non-fuel unit cost growth trajectory improving. Non-fuel unit cost growth is predicted to be about 1% for 2019. The company’s plan on increasing its bottom line remained the key highlight of the investor day as there remained a lag in the broader market for most of the year by the sector.

In the recent third quarter, the company’s top line growth of 8% was driven by higher premium product ticket revenues and double-digit percentage increases in cargo, loyalty and maintenance, repair and overhaul revenue. The bottom line improved 13% backed by revenue momentum, tax reform benefits and a lower share count.

Delta Air Lines’ stock gets a boost after Q3 earnings beat estimates

An increase in fuel prices drove adjusted operating expenses higher by $1 billion. Adjusted fuel expense increased 35% while cost per available seat mile excluding fuel remained flat. Despite this, the growth in passenger and revenue improvements across all of its components helped push earnings growth.

For the fourth quarter, the company expected total revenue growth of around 8% and total unit revenue excluding refinery sales growth of 3% to 5%. Earnings were anticipated to be $1.10 to $1.30 per share.

Higher fuel costs have been a major concern for airline companies but the recent slump in energy prices could aid in the companies to regain a strong bottom line. This year, all airlines have experienced a dent in the bottom line due to a jump in fuel costs. But Delta has escaped from the impact as 90% of the fuel expenses increase was covered by strong revenue.

Shares of Delta opened lower on Thursday and is trading in the red territory. The stock has fallen over 4% in the year so far and over 6% in the past three months.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text.