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Delta Gains Altitude, but This Stock's Really Flying Higher

By Dan Caplinger – Jan 13, 2022 at 8:41AM

Key Points

  • Markets eased higher in premarket trading Thursday morning.
  • Delta Air Lines reported solid quarterly results that sent the stock slightly higher.
  • However, a homebuilder stock saw even bigger gains following its latest earnings report.

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Markets looked ready to move upward on Thursday morning.

Investors continued to try to mount a comeback on Thursday, as the stock market eased slightly higher to reclaim more of its lost ground after a horrible first week of 2022. As of 8 a.m. ET, Dow Jones Industrial Average (^DJI 1.26%) futures were up 58 points to 36,218. S&P 500 (^GSPC 1.44%) futures had picked up 5 points to 4,721, and Nasdaq Composite (^IXIC 1.74%) futures had risen 19 points to 15,906.

Many see today as the official start of fourth-quarter earnings season, and Delta Air Lines (DAL 2.38%) was one of the first companies out of the gate to say how it fared during the final part of 2021. Investors generally liked what Delta had to say about the airline industry's prospects, but a stock in a very different earthbound industry saw even bigger gains in premarket trading. Let's take a look at what Delta said first, and then you'll learn more about the high-flying stock making noise on Thursday morning.

Modern airport lobby.

Image source: Getty Images.

Delta bids 2021 adieu

Shares of Delta Air Lines rose almost 2% in premarket trading. The airline's fourth-quarter financial results didn't have that many surprises, but they suggested that Delta remains on track for a gradual but successful recovery in the not-too-distant future.

For the quarter, Delta posted adjusted pre-tax income of $170 million, and its adjusted operating revenue of $8.4 billion had recovered 74% of the way toward its pre-pandemic performance in the same quarter during 2019. Capacity was 79% restored to levels two years ago, and adjusted operating expenses were down $1.9 billion, or 19%, showing the immense cost discipline that Delta imposed to try to make it through the pandemic.

Delta's full-year results were similarly mixed. An adjusted pre-tax loss of $3.4 billion was offset by $3.8 billion from federal payroll support programs, while adjusted operating revenue of $26.7 billion was 57% recovered from 2019 levels on 71% restoration of capacity levels.

What investors liked, though, was that Delta seemed more upbeat about 2022. Commercial passengers are returning to the skies, and Delta anticipates its capacity figures in the first quarter will reach 83% to 85% of where they were in the same quarter in 2019. Revenue should be 72% to 76% of 2019 levels, and while the omicron upsurge is affecting performance early in the period, Delta is optimistic that upward momentum will resume by the President's Day holiday in February.

KB Home is going through the roof

The big gainer on Thursday morning was KB Home (KBH 1.44%). The stock jumped more than 9% in premarket trading after the homebuilder announced its fourth-quarter results late Wednesday.

The numbers from KB Home were sensational. Revenue soared 40% to $1.68 billion during the quarter, with a 28% rise in homes delivered to 3,679. Selling prices were up 9% to more than $451,000, and KB Home saw more favorable margin performance that contributed to stellar bottom-line gains. Earnings of $1.91 per share were up 71% year over year.

The period ended a strong 2021 fiscal year for KB Home, which included deliveries of nearly 13,500 homes at an average selling price of almost $423,000. Sales climbed 37% to $5.72 billion, and full-year earnings soared 92% to $6.01 per share.

Moreover, KB Home has a huge backlog of demand even as it continues to see new orders pour in. Final backlog totaled $4.95 billion, which is the highest figure to end a year since the housing boom in 2005. The Southeast region saw backlogs more than double from 12 months ago.

Some investors have been fearful that homebuilders could suffer from high inflation and rising interest rates. However, with the cost discipline and strong demand KB Home showed, those fears might turn out to be completely unwarranted.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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