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Looking Into Delta Air Lines's Return On Capital Employed

Benzinga Insights
·2 min read

In Q3, Delta Air Lines (NYSE: DAL) posted sales of $3.06 billion. Earnings were up 32.63%, but Delta Air Lines still reported an overall loss of $6.39 billion. Delta Air Lines collected $1.47 billion in revenue during Q2, but reported earnings showed a $4.82 billion loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Delta Air Lines’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed by a business. Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q3, Delta Air Lines posted an ROCE of -1.9%.

It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but several factors could affect earnings and sales in the near future.

View more earnings on DAL

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Delta Air Lines is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of capital, some of that money can be reinvested in more capital which will generally lead to higher returns and earnings per share growth.

For Delta Air Lines, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Q3 Earnings Insight

Delta Air Lines reported Q3 earnings per share at $-3.3/share, which did not meet analyst predictions of $-3.0/share.

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