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How is Delta (DAL) Likely to Fare This Earnings Season?

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·4 min read
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Delta Air Lines DAL is scheduled to report second-quarter 2021 results on Jul 14, before the market opens.

The company’s bottom line missed the Zacks Consensus Estimate in each of the last four quarters, the average being 9.02%.

Delta Air Lines, Inc. Price and EPS Surprise

Delta Air Lines, Inc. Price and EPS Surprise
Delta Air Lines, Inc. Price and EPS Surprise

Delta Air Lines, Inc. price-eps-surprise | Delta Air Lines, Inc. Quote

Notably, the Zacks Consensus Estimate for second-quarter bottom line has narrowed to a loss of $1.46 per share from $1.51 loss, 30 days ago.

Against this backdrop, let’s discuss the factors that might have impacted Delta’s performance in the June quarter.

Driven by the recent uptick in air-travel demand (particularly for leisure), total passenger revenues at Delta are likely to have been high on a sequential basis in the quarter to be reported. The Zacks Consensus Estimate for the to-be-reported quarter’s passenger revenues indicates a 94% surge from the number reported in the March quarter. Moreover, the Zacks Consensus Estimate for traffic (measured in revenue passenger miles) suggests an 88.5% improvement from the first quarter’s reported figure.

Owing to higher traffic, load factor (% of seats filled with passengers) is expected to have improved sequentially in the June quarter. The Zacks Consensus Estimate for the to-be-reported quarter’s load factor is currently pegged at 70%, suggesting growth from 45% reported in the March quarter.

Also, the Zacks Consensus Estimate for second-quarter passenger revenues per available seat miles (PRASM: a key measure of unit revenues) is currently pegged at 10.97 cents, indicating a 60% rise from the figure reported in the first quarter of 2021.

However, the increase in fuel price per gallon is expected to have hurt the bottom line in the March quarter. Moreover, due to more and more flights taking to the skies to match the higher demand scene, fuel gallons consumed is likely to have increased in the June quarter on a sequential basis. This is likely to have dented the bottom line in the to-be-reported quarter. The Zacks Consensus Estimate for the June quarter’s fuel gallons consumed (consumed) indicates a 25.6% rise from the March quarter’s reported figure.

What Does the Zacks Model Unveil?

The proven Zacks model predicts a bottom-line outperformance for Delta this time around. Notably, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings surprise as is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Delta has an Earnings ESP of +5.65%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Delta carries a Zacks Rank #3, currently.

Highlights of Q1

In the last reported quarter, the company incurred a loss (excluding $1.70 from non-recurring items) of $3.55 per share, wider than the Zacks Consensus Estimate of $3.08 and also the first-quarter 2020 loss of 51 cents. Despite the recent uptick in air-travel demand as more and more Americans get vaccinated, the picture remains bleak when compared to the first-quarter of 2019. Consequently, passenger revenues plunged 70% to $2,748 million from the levels recorded in the comparable quarter of 2019.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider Southwest Airlines LUV, Herc Holdings HRI and Alaska Air Group ALK as these stocks too possess the right combination of elements to beat on earnings this reporting cycle.

Southwest Airlines has an Earnings ESP of +60.61% and is Zacks #3 Ranked, presently. The company will release second-quarter 2021 results on Jul 22.

Herc Holdings has an Earnings ESP of +1.85% and a Zacks Rank #2 at present. The company will release second-quarter 2021 results on Jul 22.

Alaska Air has an Earnings ESP of +11.77% and is currently a #3 Ranked player. The company will release second-quarter 2021 results on Jul 22.

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