Delta Air Lines, Inc. (NYSE:DAL) posted a drop in its 1Q2015 revenue due to a stronger dollar and lowered domestic bookings that were lower than expected.
The Atlanta-based carrier reported a revenue decline of 1.5% YoY. It also expects lower unit costs and a quarterly operating margin of 11.5%. This does not include the $300 million of early fuel hedge settlements.
Delta stated that the quarter had fluctuations, and the domestic demand did not meet expectations.
The company expects unit costs excluding fuel and profit sharing expenses for the quarter to be down by about 1%.
The Street Ratings however stated that it is a good time to but the airline company’s stocks. The rating agency believes that Delta has strength in multiple areas such as revenue growth and stock price performance. The return on equity has also decreased significantly compared to ROE from the same quarter from a year before. This signals weakness in the company, according to analysts.
Delta has also suffered from a steep decline in its earnings per share in the last quarter. Its revenue growth also trails the industry average of 22.4%.
Delta said the growing currency fluctuations had an impact on the company, which was further affected by the failing to achieve additional domestic strengths. The company expects a 1% drop in the unit costs excluding fuel and profit-sharing expenses. According to the company, the decrease is driven by 0.8% raise from foreign currency and the continued benefits from delta’s domestic reflecting and cost reduction initiatives.
The company also paid less for fuel that is its largest variable cost. The forecast for fuel is $2.90 to $2.95 per gallon, down from $2.92 to 2.97 per gallon.
Delta Air Lines, Inc. (NYSE:DAL) also expects the employee profit sharing expenses to be $140 million The Company expects profit margins of 8% to 9% and system capacity to raise by 5%.
The company has debt to equity ratio of 1.1, however that is still below the industry average. The quick ratio of 0.39, shows that the company has very weak liquidity.