Delta Air misses fourth-quarter expectations, sees unit revenue decline

The fourth-quarter results were shy of analysts expectations, with the company blaming volatile currency markets for a drop in revenue. But the airline’s bottom line did benefit from drastically lower fuel prices.

Delta posted $926 million in net income for the fourth quarter of 2015.

Passenger unit revenues fell 1.6%, which includes the impact from foreign currency. Delta sees passenger revenue falling 2.5%-4.5% during Q1.

But Delta officials said bookings for this spring are ahead of last year’s pace because lower gasoline and heating bills mean that consumers have more money to spend.

The Atlanta, GA-based carrier’s fourth quarter earnings (excluding special items) of $1.18 per share fell short of the Zacks Consensus Estimate by a penny. But as oil prices stay lower for longer, Delta said it could realize $3 billion in cost savings this year. Following the earnings report, Delta stock lost 1.12% during pre-market hours to trade at $44 per share as of 7:04 AM EST.

Delta is focusing “our commercial efforts on those areas of the business with the best opportunity such as the domestic marketplace, while reducing our exposure in some weaker global regions”, its President Ed Bastian said in a news release.

The company, which belongs to Major Airlines, reported adjusted earnings per share of $1.18 on revenue of $9.5B. It paid employees $1.5 billion in profit sharing and gave shareholders $360 million in dividends and spent $2.2 billion to buy back its own stock – a technique that companies use to raise the price of their shares.

On the other hand, Delta’s initial guidance for Q4 also called for a 2.5%-4.5% passenger unit revenue decline, and the company ultimately outperformed that forecast.

Delta’s net income of US$980 million in the fourth quarter of 2015 compared to a paper loss of US$712 million a year earlier, which accounted for the value of its unsettled fuel hedge contracts dropping by US$1.2 billion.

Delta’s profit is flying higher. Vetr cut Delta Air Lines from a “strong-buy” rating to a “buy” rating and set a $49.96 price objective for the company.in a research note on Tuesday, October 6th.

Stifel’s observes that if the U.S.is heading into a recession, airlines like Delta, American Airlines (AAL), Southwest Airlines (LUV), Alaska Air (ALK) and United Continental (UAL) is entering it from “a position of strength”.