Earnings Season
Personally, I think aggregating bottom up information is an excellent way to generate a view of the bigger picture. As such, I am interested in datapoints that emerge in earning season, specifically any anectdotes about pricing, anticipated cap ex, and layoffs. Given our responsibility to our employers, generalities are sufficient as long as they are reasonably well supported.
posted by Odoacer at
10:16 AM
8 Comments:
I'll start. Delta threw out a .54 EPS vs. Street Estimates of .41. And they basically said that Q4 was looking to be better than the street had been forecasting.
Why? Demand is stronger than it has been (planes were, on average, 83% full vs. 80% a year ago), they are able to cut costs (it is an easy comp for them), and they have, gasp, pricing power.
They reported quarterly EBITDAR of 810 million vs. $529 a year ago. Based on guidance for Q4, you can back into the idea that they will do $500-$580 of EBITDAR (I realize, it is a big range but I can't do ALL the work for you) vs. a total of 444 a year ago.
Implication is basically 2.0-2.5 billion in EBITDAR, assuming life is run in a vacuum (big assumption).. Run rate CapEx is closer to $600 million. Interest expense is probably $400. They will take delivery of some planes which will help to cut costs as far as fuel and maintenance go (but which will increase interest expense and/or rent, depending on financing).
And guess what? More capacity is coming out. UAUA, AMR, and CAL are all trimming domestic capacity. Anecdotally, I've heard that UAUA is taking 11% of its capacity out of Dulles.
Want to guess which way pricing is likely to go? What with $85 oil and the AVERAGE (including puddle hopper) flights at 83% full (this means that hub flights are > 90% full).
Gold's earnings were good this QTR.
And Delta, recently out of bankruptcy, hired Northwest’s old CEO, who drove that airline in bankruptcy. Seems like a logical hire. This is almost as bad as Norv Turner getting another job in the NFL.
Fixed income sales and trading appears weak...... Maybe some layoffs coming on Wall Street..
Had to be the smartass
I'm not so sure that it was Northwest's CEO that drove the company into bankruptcy as much as it was a shitty company with too much capacity and a shitty balance sheet entering a shitty economic period right before an unprecedented and unforecastable terrorist attack that threw the nation into a total panic that lasted for years. Now, one can make the argument that the first couple of those issues were the fault of management. But if you eliminate just one of those catalysts, you probably don't have 4 of the big 6 filing within a couple of years of each other.
Of course, the history of airlines is not good, but < 5x EBITDAR is a joke. And, while I am always hesitant to say this, it is, to some extent, different this time. Changes in pension accounting laws, the absence of further pension obligations (in the case of Delta), discipline re: capacity growth, possible consolidation, and an enormous cash position (exceeding the market cap in the case of AMR, CAL, and LCC) provide for greater optimism and flexibility than these guys have seen in probably 20 years.
FWIW, I prefer AMR and CAL to DAL, but I think the entire legacy industry is cheap. If you believe Bear Stearns (I think the analyst is more right than wrong), AMR is at 4.4x '08 EBITDAR, DAL is at 4.6x '08 EBITDAR, UAUA is at 5.2x '08 EBITDAR, CAL is at 5.7x '08 EBITDAR, LCC is at 4.7x '08 EBITDAR, and NWA is at 5.0x '08 EBITDAR. This is after adding equity, debt, capitalizing operating leases at 7x, and netting out cash.
In my opinion, one of the problems is that too many people have the attitude of our good friend blog and won't even look at the things. Sooner or later the fundamentals will win out and if these guys stay disciplined and keep printing loads of cash, the stocks have to go up... especially considering that most of these guys are somewhere in the neighborhood of 60% (Delta) to 80% (Continental) debt financed... and that is using NET!?!?!?!?! debt.
Downey earnings were pretty good.
Increased provision $72 MM.
25% decline in NIM ouch.
Southern California is going to be a great place to buy property.
MO just beat on higher cigarette prices. Oh, and retail prices rose in September.
Better cut again.
West coast rents rose 5% in the 3rd quarter.
Nokia just beat on higher cell phone prices.
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