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Delta Air Lines (DAL) Q4 Earnings: Is a Surprise in Store?

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Delta Air Lines, Inc ((DAL - Free Report) ) is scheduled to report fourth-quarter 2016 results on Jan 12, 2017, before the market opens.

This Atlanta, GA-based carrier reported better-than-expected earnings in the third quarter of 2016. In fact, the carrier outpaced earnings estimates in three of the last four quarters with an average earnings beat of 2.01%. It remains to be seen how the company performs this quarter.

Earnings Whispers

Our proven model shows that Deltais likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP: The Earnings ESP for Delta is +1.24%%. This is because the Most Accurate estimate stands at 82 cents while the Zacks Consensus Estimate is pegged at 81 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: The carrier carries a Zacks Rank #3 (Hold). Please note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conversely, we caution against Sell-rated stocks (Zacks Rank #4 and 5) going into an earnings announcement, especially if the company has seen negative estimate revisions.

The combination of Delta’s favorable Zacks Rank and +1.24% ESP makes us reasonably confident of a positive earnings beat on Jan 12.

Factors at Play

Delta posted impressive traffic results for December with an increment in load factor. Moreover, the company’s completion factor and on-time performance was commendable. We are positive on the company’s initiation of flight services to Cuba. We are also impressed with the company’s shareholder returns policy and its efforts to finalize important employee contracts. The company also expects Passenger Revenue per Available Seat Mile (PRASM) to decline in the range of 2.5% to 3% for the fourth quarter from the earlier guidance of a decline of 3% to 5% issued in Oct 2016.

Delta also faces intense competition from peers like American Airlines Group In. (AAL - Free Report) and United Continental Holdings Inc. (UAL - Free Report) . Per the company’s guidance, cost is expected to be up for the fourth quarter.

We note that the company’s stock has outperformed the broader Zacks categorized Transportation-Airlines industry. The company gained 30.33%, while the industry gained 29.43% over the same period.

 

A Stock That Warrants a Look

Delta is not the only company looking up this time around. Here is an airlines stock that you may want to consider as our model shows that it has the right combination for an earnings beat this quarter:

JetBlue Airways Corp. (JBLU - Free Report) has a Zacks Rank #3 and an Earnings ESP of +4.26%. The company is expected to report fourth-quarter results on Jan 26.

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