Photo Credit: Bryan Jones

Delta Air Lines (DAL) Industrials - Airlines | Reports October 13, Before Market Opens

Key Takeaways

• The Estimize consensus is calling for earnings per share for $1.66 on $10.61 billion in revenue, 1 cent higher than Wall Street on the bottom line and about in line on the top.
• Delta expects key PRASM metrics to fall 7% with 1% coming by way of the August outage that resulted in 2,000 flight cancellation
• The airline industry, Delta included, has faced significant headwinds including foreign currency pressure, mounting terrorist threat, weaker business flight demand, and increasing competition
• What are you expecting for DAL? Get your estimate in here!

Delta is the first of the airlines to report this earnings season and will kicks things off Thursday afternoon. Its scheduled third quarter report is expected to set the tone for major airlines like United Continental and American Airlines, which take the stage the following week. It appears as if Delta’s troubles won’t be easing with tomorrow’s report. Early signs are pointing to a continued slowdown on the top and bottom line.

Analysts at Estimize are calling for earnings per share of $1.66, down 4% compared to the same period last year. That estimate has declined 5% since Delta’s most recent report in July. Revenue for the period is anticipated 4% lower to $10.61 billion, marking a 5th consecutive quarter of negative sales growth. Investors can take comfort that the stock typically pops 1-5% in the 30 days following an earnings report. 

Major airlines have faced significant headwinds lately from foreign currency pressures, mounting terrorist threats, weaker last minute business flights, and a simple reluctance to fly. Delta, in particular, has seen both revenue and earnings decline as results. Last quarter printed a 16% jump on the bottom line, down from 193% the quarter prior, and a 2% decline on the top. Passenger revenue per available seat mile (PRASM), the key metric all airlines are measured on, fell 4.9%. These ongoing woes have played a role in share prices falling 22.5% this year.

The above issues are likely to play a role in Thursday’s pivotal reports. Meanwhile, Delta is expected to see pricing pressure due to the highly competitive market. Low budget airlines such as Southwest and Spirit have captured greater market shares through a more consumer friendly pricing model. Delta has already indicated that Q3 PRASM could decline by as much as 7%, with 1% coming from the outage it experience in August. The disruption resulted in more than 2,000 flight cancelations and just as many refunds.

On a positive note, Delta will start flight services to Cuba which is expected to provide the airline with a much needed source of revenue. Delta also indicated that traffic figure for September 2016 were impressive. Any indication that Q4 guidance could be lifted is sure to put a smile on shareholders’ faces.