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Virgin America (VA) Q2 Earnings: Disappointment in Store?

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Virgin America Inc. is set to report second-quarter 2016 earnings on Aug 5, before market opens.

In the first quarter of 2016, the company had reported better-than-expected earnings per share. Results were aided by low fuel costs.

Things do not appear to be so rosy this time around as our quantitative model doesn’t hint at an earnings beat. Here’s why:

Virgin America doesn’t have the right combination of the two key ingredients – positive Earnings ESP and a Zacks Rank #3 (Hold) or better – for increasing the odds of an earnings beat.

Zacks ESP: The Earnings ESP for Virgin America is +5.98%. This is because the Most Accurate estimate of $1.24 is 7 cents ahead of the Zacks Consensus Estimate.

Zacks Rank: Virgin America carries a Zacks Rank #5 (Strong Sell).  Please note that we caution against Sell-rated stocks going into the earnings announcement.

Looking at the fundamentals, here are the factors that should be at play:

More than the earnings numbers, investors await updates on the impending acquisition of Virgin America by Alaska Air Group (ALK - Free Report) . The deal, worth approximately $4 billion inclusive of debt and capitalized aircraft operating leases, was inked in Apr 2016. Also, it was recently approved by the shareholders of Virgin America and is expected to close by the end of this year.

Apart from updates on the merger, focus will remain on operating revenue per available seat mile (RASM – a key measure of unit revenue) as Virgin America, like most other carriers such as Delta Air Lines (DAL - Free Report) , is struggling with respect to unit revenues.

VIRGIN AMERICA Price and EPS Surprise

VIRGIN AMERICA Price and EPS Surprise | VIRGIN AMERICA Quote

Stock to Consider                                                                             

With Virgin America likely to disappoint, we present below a transportation stock likely to beat the Zacks Consensus Estimate this earnings season, as per our quantitative model.

LATAM Airlines Group S.A. has an Earnings ESP of over +100% and a Zacks Rank #3. The company is expected to report second-quarter results on Aug 11.

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Delta Air Lines, Inc. (DAL) - free report >>

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