Delta raises 2018 earnings guidance 20% due to tax law

  • Delta's fourth-quarter revenue and profit beat expectations.
  • The airline says the new tax law will help offset higher fuel costs somewhat.

Delta Air Lines on Thursday posted fourth-quarter earnings that beat Wall Street's expectations, and it raised its 2018 guidance about 20 percent.

Fueling Delta's upbeat forecast was its ability to increase how much it generates from each seat it flies per mile, a key revenue metric. This rose 4 percent in the three months ended in December from a year earlier.

Passenger revenue increased in every region, though trans-Atlantic travel was a standout in the quarter with 9 percent growth on the year. Cargo revenue also surged, as consumer demand grew for speedy deliveries.

Delta's shares surged after the report and outlook from the airline's executives, adding 4.8 percent to close at $58.52. Its rivals American and United rose 4.9 and 4.6 percent, respectively.

For the quarter ended Dec. 31, the second-largest U.S. airline posted net income of $572 million, or 80 cents per share, a decline of 8 percent from the year-earlier period.

On an adjusted basis, Delta earned 96 cents per share on revenue of $10.25 billion. Analysts polled by Thomson Reuters expected earnings of 88 cents a share on revenue of $10.13 billion.

With the U.S. Capitol dome in the distance, a Delta airplane takes off from Ronald Reagan National Airport in Washington, DC.
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With the U.S. Capitol dome in the distance, a Delta airplane takes off from Ronald Reagan National Airport in Washington, DC.

Delta adjusted its earnings to include items such as its minority stakes in Virgin Atlantic and Aeromexico, as well as one-time charge of $150 million due to the tax law, which revalues its deferred tax assets. Delta, like some of its competitors, doesn't pay federal taxes due to previous years of losses. The lower corporate tax rate revalues those tax assets, which are used to offset owed taxes.

Delta raised its full-year estimates for 2018 from $6.35 a share to $6.70 a share because of benefits from the new tax law, the airline's CEO Ed Bastian said in a release. During an investor day last month, the airline forecast earnings per share for 2018 of $5.35 to $5.70 for 2018.

The new tax law will help the company offset some of the impact from higher fuel costs, Delta said. The airline said its fuel expenses rose more than 20 percent in the quarter.

On a call later Thursday, Delta executives will likely address the impact from a powerful winter storm and resulting travel chaos at New York's John F. Kennedy International Airport, a major hub for Delta, as well as an ongoing trade dispute between Delta suppliers Boeing and Canada's Bombardier.