Delta Lures Investors With Earnings Beat, Dividend, Buyback, Debt Cut

ATLANTA ( TheStreet) -- Delta ( DAL) beat earnings estimates, reduced debt, paid a dividend and bought back shares, underscoring its commitment to lure investors back to the airline industry.

In the third quarter, excluding items, the carrier earned $1.2 billion, or $1.41 a share. Analysts surveyed by Thomson Reuters had estimated $1.36. Revenue rose 6% to $10.49 billion, in line with estimates. Including $157 million in one-time items, net income was $1.4 billion, or $1.59 a share.

Consolidated passenger revenue grew 6.7% to $9.25 billion. "The momentum we have built by running an outstanding operation and investing in our product and people enabled a 7% revenue growth, with particularly strong performance in Atlanta, New York and London," said Delta President Ed Bastian, in a prepared statement.

"The revenue environment appears solid through the end of the year, including strong holiday bookings, and we expect to continue to build on the revenue premium we deliver versus the industry," Bastian said.

Delta was the first airline to report third-quarter results. If analyst estimates hold, Delta revenue will exceed United ( UAL) revenue, making Delta the world's largest airline by revenue during the quarter.

During the quarter, Delta spent $100 million to repurchase 4.8 million shares at an average price of $20.82 and also paid $51 million in dividends.

The carrier ended the quarter with $9.9 billion in net debt, a reduction of $7 billion since 2009. "The $1.8 billion in free cash flow we have generated so far this year has allowed us to achieve our initial $10 billion debt target and start down the path toward our new $7 billion target," said Chief Financial Officer Paul Jacobson.

Passenger revenue per available seat mile grew 4%. Domestic unit revenue rose 7.7%, the biggest gain, while consolidated unit revenue grew 4.0%. Pacific unit revenue fell 4.2%, the only segment decline.

On the cost side, consolidated unit cost excluding fuel and special items grew 1.1%, driven by the impact of wage increases and operational and service improvements. Fuel expenses, excluding mark-to-market hedging adjustments, declined $81 million due to lower market fuel prices and better settled hedge performances.

Operations at the Trainer refinery produced a $3 million profit. Lower crack spreads pressured results, but also reduced market jet fuel prices.

During the current quarter, Delta said it expects a unit cost increase of 2%, with a capacity increase of 1% to 3%.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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