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Delta (DAL) to Report Q3 Earnings: What's in the Offing?

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Delta Air Lines (DAL - Free Report) is scheduled to report third-quarter 2021 results on Oct 13, before the market opens.

The company’s bottom line lagged the Zacks Consensus Estimate in three of the last four quarters (outpacing the consensus mark in the other one), the average miss being -0.09%.

Delta Air Lines, Inc. Price and EPS Surprise

Delta Air Lines, Inc. Price and EPS Surprise

Delta Air Lines, Inc. price-eps-surprise | Delta Air Lines, Inc. Quote

The Zacks Consensus Estimate for September-quarter earnings has been revised 62.2% downward to 17 cents over the past 60 days. The downward revision is mainly due to the Delta variant-led woes.

Against this backdrop, let’s discuss the factors that might have impacted Delta’s performance in the September quarter.

Management recently stated that ticket sales stabilized and began to improve. Indicative of this recent improvement, the Zacks Consensus Estimate for the to-be-reported quarter’s passenger revenues is pegged at a 31.9% uptick from the number reported in the June quarter. Moreover, the Zacks Consensus Estimate for traffic (measured in revenue passenger miles) suggests a 22.7% improvement from the second quarter’s reported figure.

Owing to higher traffic, load factor (% of seats filled with passengers) is expected to have improved sequentially in the September quarter. The Zacks Consensus Estimate for the to-be-reported quarter’s load factor is currently pegged at 76%, implying growth from 69% reported in the June quarter.

Also, the Zacks Consensus Estimate for third-quarter passenger revenues per available seat miles (PRASM: a key measure of unit revenues) is currently pegged at 13.08 cents, indicating an 18.9% rise from the figure reported in the second quarter of 2021.

However, the increase in fuel price per gallon is expected to have hurt the bottom line in the September quarter. Moreover, due to more and more flights taking to the skies to match the higher demand scene, fuel gallons consumed are likely to have increased in the September quarter on a sequential basis. This is likely to have dented the bottom line as well in the said period. The Zacks Consensus Estimate for the September quarter’s fuel gallons consumedindicates a 13.9% rise from the June quarter’s reported figure.

What Does the Zacks Model Unveil?

The proven Zacks model does not predict a bottom-line outperformance 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 an earnings surprise. Unfortunately, this is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Delta has an Earnings ESP of -28.54% as the Most Accurate Estimate is currently pegged at 12 cents, 5 cents below the Zacks Consensus Estimate. 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 Q2

In the last reported quarter, the company incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share, narrower than the Zacks Consensus Estimate of a loss of $1.41 as well as the second-quarter 2020 loss of $4.43. Despite the recent uptick in air-travel demand as more and more Americans get vaccinated, the picture remains bleak when compared to the scenario in second-quarter of 2019. Consequently, passenger revenues plunged 53% from the levels recorded in the comparable quarter of 2019.

Stocks to Consider

Investors interested in the broader Transportation  sector may consider C.H. Robinson Worldwide (CHRW - Free Report) , Covenant Logistics Group (CVLG - Free Report) and Old Dominion Freight Line (ODFL - Free Report)  as these stocks too possess the right combination of elements to beat on earnings this reporting cycle.

C.H. Robinson Worldwide has an Earnings ESP of +2.03% and is Zacks #3 Ranked, presently. The company will release third-quarter 2021 results on Oct 26.

Covenant Logisticshas an Earnings ESP of +0.50% and a Zacks Rank #2 at present. The company will release third-quarter 2021 results on Oct 20.

Old Dominion Freight Line has an Earnings ESP of +0.35% and is currently a #3 Ranked player. The company will release third-quarter 2021 results on Oct 27.