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We expect premier passenger carrier, Delta Airlines Inc. (DAL - Analyst Report), to beat expectations when it reports third-quarter 2013 results on Oct 22, before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that DAL is likely to beat earnings because it has the right combination of two key components.

Positive Zacks ESP: Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +2.24%. This is a meaningful and leading indicator of a likely positive earnings surprise. 

Zacks Rank: DAL currently has a Zacks Rank #2. Note that stocks with Zacks Ranks of #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. 

The combination of DAL’s Zacks Rank #2 and +2.24% ESP makes us confident of a positive earnings beat this release.

What is Driving the Better-Than-Expected Earnings?

We expect an impressive performance from Delta this quarter owing to better service offering, capacity discipline and customer-focused initiatives. Introduction of services and announcement of several new routes connecting various domestic and international destinations will propel growth. Additionally, Delta recently got the U.S. Department of Transportation’s approval to tie up with Virgin Atlantic, which will give the Atlanta-based carrier a strong foothold in the trans-Atlantic market.

Significant competition in several of its hub airports remain one of the major challenges for Delta. Additionally, the carrier competes with foreign operators traveling to international destinations, as well as between foreign points. The company also remains vulnerable to weak economic conditions as the major countries around the world continue to improve gradually from a financial crisis.

Other Stocks to Consider

Other companies you may want to consider on the basis of our model which shows that these have the right combination of elements to post an earnings beat this quarter include:

Republic Airways Holdings Inc. (RJET - Snapshot Report) with earnings ESP of +2.82% and Zacks Rank #1 (Strong Buy).

U.S. Airways Group Inc. with earnings ESP of +6.54% and Zacks Rank #2 (Buy).

Álaska Air Group Inc. (ALK - Snapshot Report) with earnings ESP of +1.91% and Zacks Rank #2 (Buy).

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