The company has performed well in fiscal year 2016 despite sluggish market conditions
Published By: Eunice Gettys on January 31, 2017 09:55 am EST
Delta Air Lines, Inc. (NYSE:DAL) has reported robust financial results for fiscal year 2016 despite sluggish market conditions. It reported pre-tax income of $6.6 billion and $1.1 billion of profit. The company reported lower margins compared to fiscal year 2015. However, given the market condition that it was operating in, it reported fairly strong results for the year, which has impressed the stakeholders and has shocked competitors at the same time.
Delta reported operating cash flow of $7.2 billion and free cash flow of $3.8 billion. This shows that the company has enough funds to tackle capital expenditure. Moreover, it shows a strong liquidity position that the company is holding with an estimated 70% of FCF. With such a strong muscle in terms of cash, shareholders can expects safe investment in the company.
In addition, Delta has a very strong mechanism of capital deployment, which should also instill confidence in the investors. The model of capital investment deployed by the company allows it to reinvest 50% of the operating cash flows leading to long-term growth. This will also help the company reduce the fleet age.
Likewise, the company is also practicing sustainable capital deployment strategy, where the company focuses on strategic investments such as Aero Mexico. The main aim of this strategy is to benefit 500 million passengers flying between the US and Mexico.
As far as the balance sheet is concerned, Delta has managed to bring down the Debt/EBITDAR ratio from 8.2x to 8.0x. Furthermore, the Airline stated that it plans to reduce debt to $4 billion by 2020.
Delta stock traded at $47.67, falling a massive 4.08% on Monday’s close. This was mainly due to technical issues that have plagued the company. Delta is devising strategies to cope up with the computer outage issues.
In addition, the company has a market capitalization of $34.86 billion. This comes with a price to earning (P/E) ratio of 8.25 and earnings per share (EPS) of 5.78.