Delta Down on Investor Update, Hurricane Florence to Hurt Q3
Shares of Delta Air Lines, Inc. DAL declined 3.4% to $54.69 on Oct 2, after the airline behemoth disclosed at an Investor Update that it anticipates Hurricane Florence to hurt third-quarter pre-tax income by approximately $30 million. The Atlanta, GA-based carrier further said that weather-related disruptions might weigh on unit revenues to the tune of roughly 0.5 points. Also, significant increase in fuel prices over the past 12 months is expected to limit bottom-line growth.
Despite high fuel costs, Delta expects adjusted total revenue per available seat miles (TRASM: a key measure of unit revenue) to increase year over year between 4% and 5% in the third quarter (the previous view had projected the metric to increase in the 3.5-5.5% band). Strong demand for air travel and improving yields led to the bullish forecast.
According to Delta, these favorable factors partially mitigated the adverse impact of sharp rise in fuel prices per gallon, which are projected between $2.22 and $2.27 for third-quarter 2018. Adjusted pre-tax margin is anticipated to be approximately 13% (mid-point of the guided range in July).
Delta Air Lines, Inc. Price
Delta Air Lines, Inc. Price | Delta Air Lines, Inc. Quote
Non-fuel unit costs are anticipated to be roughly flat year over year. System capacity is anticipated to increase approximately 3.9%. Delta’s third-quarter earnings per share are expected to be in the $1.70-$1.80 band (the previous view had projected the metric in the $1.65-$1.85 range). Notably, this third-quarter projection is higher than $1.57 per share registered in the year-ago period. The uptick can be attributed to reduction in effective tax rate, which is expected to be approximately 23% in the soon-to-be-reported quarter.
The above update apart, Delta unveiled its September traffic report on the same day. Consolidated traffic, measured in revenue passenger miles (RPMs), came in at 18.3 billion, up 3.7% year over year. Consolidated capacity (or available seat miles/ASMs) expanded 4.7% to 21.9 billion on a year-over-year basis. Consolidated load factor (percentage of seats filled by passengers) decreased 80 basis points to 83.6% as capacity expansion outpaced traffic growth. The carrier transported 15.2 million passengers in the month, up 4.1% on a year-over-year basis.
Zacks Rank & Key Picks
Delta has a Zacks Rank #3 (Hold). Some better-ranked airline stocks are Spirit Airlines, Inc. SAVE, Southwest Airlines Co. LUV and United Continental Holdings, Inc. UAL. While Spirit sports a Zacks Rank #1 (Strong Buy), Southwest and United Continental carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Spirit, Southwest and United Continental have rallied more than 23%, 4% and 35%, respectively, in a year’s time.
Best Electric Car Stock? You'll Never Guess It.
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
See Zacks Best EV Stock Free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
