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How Will Coronavirus-Hit Delta (DAL) Fare This Earnings Season?

Zacks Equity Research
Updated ·4-min read

Delta Air Lines DAL is scheduled to report second-quarter 2020 results on Jul 14, before the market opens.

Delta has an excellent record with respect to its bottom line, which outpaced the Zacks Consensus Estimate in each of the last four quarters, the average being 13.9%.

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

Moreover, the consensus mark for the second-quarter bottom line is currently pegged at a loss of $4.06 cents per share, implying a southbound revision from an earnings estimate of 36 cents, 90 days ago

Against this backdrop, let’s dig deeper to find out the factors that might have impacted Delta’s June quarter.

We expect low passenger revenues, which account for bulk of the top line, to have dented Delta’s second-quarter performance. In fact, management expects revenues for the period to have plunged 90% from the year-ago level, thanks to coronavirus-induced travel-demand woes.

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In fact, passenger revenues are likely to have been much lower than the first-quarter reading as the COVID-19 pandemic started affecting the metric, mainly since March. Consequently, the entire second quarter (April-June months) bore the brunt of the meltdown in air-travel demand. Notably, the Zacks Consensus Estimate for passenger revenues indicates a massive three-digit decline from the number reported in the March quarter.

Due to plummeting revenues, Delta cut capacity to match the bleak demand scenario. System-wide capacity is expected to have slumped 85% year over year in the second quarter. However, low fuel costs are likely to have supported the bottom line in the to-be-reported quarter. Notably, the Zacks Consensus Estimate for average fuel price per gallon suggests a 40.1% drop from the figure reported in the March quarter.

What Does the Zacks Model Unveil?

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

Earnings ESP: Delta has an Earnings ESP of +11.83%.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 33 cents from non-recurring items) of 51 cents per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of 72 cents. Delta had reported earnings of 96 cents per share (on an adjusted basis) in the year-ago quarter, driven by high passenger revenues as air-travel demand was buoyant at that time.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider Southwest Airlines LUV, United Airlines UAL and Air Lease Corporation AL as these stocks too possess the right combination of elements to beat on earnings this reporting cycle.

Southwest Airlines has an Earnings ESP of +9.19% and a Zacks Rank of 3 at present. The company will release second-quarter 2020 results on Jul 23.

United Airlines has an Earnings ESP of +18.35% and is Zacks #3 Ranked, presently. The company will release second-quarter 2020 results on Jul 21.

Air Lease has an Earnings ESP of +23.32% and is currently a #3 Ranked player. The company will release second-quarter 2020 results on Aug 6.

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