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The Zacks Analyst Blog Highlights: Delta Air Lines, United Airlines, American Airlines and Southwest

Zacks Equity Research

For Immediate Release

Chicago, IL – January 15, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Delta Air Lines DAL, United Airlines UAL, American Airlines AAL and Southwest LUV.

Here are highlights from Tuesday’s Analyst Blog:

Delta (DAL) Beats Big on Earnings: What to Expect from Remaining Airlines

Delta Air Lines illustrated an impressive beat on both top and bottom-lines, propelling the share price up over 4% in morning trading. DAL’s reported EPS surpassed analysts’ estimates by more than 20%, representing a year-over-year appreciation of 31% and its largest EPS beat in almost 6 years. The firm also rose its 2020 Q1 guidance. I expect that this stock will move from its Zacks Rank #2 (Buy) to a #1 (Strong Buy) once analysts have adjusted their models for the positive earnings.

Delta kicked off earnings season for the airlines on an optimistic note, but was the firm’s positive earnings and outlook a product of inherent advantages, or were there industry-wide implications? The answer is a combination of the two.

In Delta’s press release this morning, it associated its significant EPS beat with stronger than anticipated revenue, lower fuel costs, and a 9 cent gain related to its unwinding partnership with GOL. Lower fuel costs and some of the increased revenue can be associated with an industry-wide positive. More passengers and lower costs per passenger. Top US Airline stocks including United Airlines, American Airlines and Southwest are up over 1% in trading this morning.

737 MAX

The critical difference between Delta and its biggest competitor is that Delta doesn’t fly the Boeing 737 MAX aircraft. This is a significant advantage considering that this grounding is negatively impacting the capacity of all the other major airlines. Delta’s increase in revenues is partially a product of Delta taking advantage of the other airlines’ loss in capacity from the 737 MAX grounding. Southwest is the most exposed with 34 737 MAXs and 310 orders, followed by American who has 24 737 MAXs and 100 orders. The full Q4 impact of this plane’s grounding on the other airlines will show in their reports and earnings calls in the coming weeks.

Upcoming Airline Earnings

United is releasing its earnings Tuesday, January 21st, after the bell, and according to Zacks Consensus estimates, analysts are expecting an EPS of $2.65 on sales of $10.87B. American Airlines is reporting on before the market opens Thursday, January 23rd, and according to Zacks Consensus estimates, analysts are anticipating an EPS of $1.24 on sales of $11.36B. Southwest is also reporting before the bell on Thursday, and EPS estimates stand at $1.11 on revenues of $5.72B.

Take Away

Delta’s robust earnings this morning has created positive sentiment for the broader airline industry, but we shouldn’t get overly optimistic about the upcoming earnings because much of the upside was Delta specific. We will see how much of an impact the Boeing 737 MAX’s grounding has on the rest of the space.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Click to get this free report American Airlines Group Inc. (AAL) : Free Stock Analysis Report Southwest Airlines Co. (LUV) : Free Stock Analysis Report United Airlines Holdings Inc (UAL) : Free Stock Analysis Report Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research