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Delta Air Lines (DAL) Investor Breakfast Takeaways - UBS

May 17, 2016 8:45 AM EDT
Get Alerts DAL Hot Sheet
Price: $47.87 +1.18%

Rating Summary:
    26 Buy, 4 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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UBS analyst, Darryl Genovesi, noted four key take-aways from the Delta Air Lines (NYSE: DAL) investor breakfast:

1.) All of DAL's major three-year financial targets held-up including 15%+ EPS growth while some increased including $4.5-5.5B in annual FCF vs. $4-5B previously

2.) DAL thinks it can get to flat PRASM by year-end without any help from an improved overall industry supply-demand dynamic

3.) ability to yield-manage different main-cabin products makes a big difference

4.) near-term capex is a bit lower than expected while longer-term capex may be a touch higher.

Overall, the market seems to be focusing on DAL's commitment to its longterm targets and its big dividend raise with the stock outperforming the group by ~200bps.

DAL needs to hold EBIT on an organic basis to hit its EPS growth target, tough task with industry supply outgrowing demand, crude nearing $50/bbl, and an amended pilots deal on the horizon, but DAL thinks it can get there. It didn't explicitly forecast 2017 unit revenue (PRASM), but did say "higher", even if the industry

S-D situation doesn't improve.

DAL is now planning to return 70% of FCF to investors over next three years (50% prior guidance), which essentially incorporates plan for slower debt paydown as disclosed in December. Overall result is $3.5B in annual cash returns to equity holders including $625M dividend (2% yield) and $2.9B annual buyback, which after $500M annual debt paydown leaves ~$1B/year available for "strategic initiatives".

No change to Buy rating or $54 price target.

For an analyst ratings summary and ratings history on Delta Air Lines click here. For more ratings news on Delta Air Lines click here.

Shares of Delta Air Lines closed at $43.00 yesterday.



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