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Delta (DAL) Stock Rallies on Encouraging Q3 Unit Revenue View
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Delta Air Lines (DAL - Free Report) has struggled so far this year in the face of multiple headwinds including the back-to-back natural calamities (Harvey, Irma and Maria). So far this year, the stock has gained 4.2%, underperforming the 8.8% rally of the industry it belongs to.
However, the trading session on Oct 3, 2017 reinstated investors’ optimism on the airline behemoth as the stock gained 6.6% to close the trading session at $51.25.
Reasons Behind the Surge
Delta stated that it expects passenger unit revenue to increase approximately 2% in the third quarter of 2017 on a year-over-year basis. The guidance includes a negative impact of Irma to the tune of 1 point. Operating margin for the third quarter is projected between 15.5% and 16.5%. Hurricane Irma is likely to impact pre-tax income to the tune of approximately 120 million.
In September 2017, Delta had projected passenger unit revenue to grow between 2% and 3% and operating margin was forecasted in the 16.5%-17.5% range. Notably, these projections were made before Irma disrupted its operations leading to 2,200 flights cancellations at Delta.
Consequently, the fresh projections, though numerically weaker than the previous ones, pleased investors as the impact of Irma on the company’s financials was softer than expected. This, in turn, led to the surge in the stock price.
Fuel price per gallon in the third quarter of 2017 is expected between $1.68 and $1.73. Non- fuel nit cost (including profit sharing) is projected to grow at approximately 2.5% on a year-over-year basis. System capacity is projected to improve 1.6%.
The stock price appreciation was not limited to Delta only. Other carriers like American Airlines Group (AAL - Free Report) and JetBlue Airways (JBLU - Free Report) were also boosted by Delta’s projections and saw significant increase in their respective stock prices. Investors interested in these carriers must be hoping that the impact of Irma would be less severe than expected on them similar to Delta.
Traffic Results
Delta unveiled the improved projections while releasing its traffic data for the month of September. While traffic (total system) increased 0.3% year over year, capacity expanded 0.6% for the same month. Nevertheless, load factor (percentage of seats filled by passengers) declined 20 basis points to 84.4% as traffic growth was outpaced by capacity expansion in the same period.
On a year-to-date basis, traffic improved 2.1% while capacity expanded 0.6%. Load factor improved 130 basis points to 85.7%.
SkyWest has witnessed the Zacks Consensus Estimate for current-year earnings being revised 0.6% upward over the last 60 days.
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Delta (DAL) Stock Rallies on Encouraging Q3 Unit Revenue View
Delta Air Lines (DAL - Free Report) has struggled so far this year in the face of multiple headwinds including the back-to-back natural calamities (Harvey, Irma and Maria). So far this year, the stock has gained 4.2%, underperforming the 8.8% rally of the industry it belongs to.
However, the trading session on Oct 3, 2017 reinstated investors’ optimism on the airline behemoth as the stock gained 6.6% to close the trading session at $51.25.
Reasons Behind the Surge
Delta stated that it expects passenger unit revenue to increase approximately 2% in the third quarter of 2017 on a year-over-year basis. The guidance includes a negative impact of Irma to the tune of 1 point. Operating margin for the third quarter is projected between 15.5% and 16.5%. Hurricane Irma is likely to impact pre-tax income to the tune of approximately 120 million.
In September 2017, Delta had projected passenger unit revenue to grow between 2% and 3% and operating margin was forecasted in the 16.5%-17.5% range. Notably, these projections were made before Irma disrupted its operations leading to 2,200 flights cancellations at Delta.
Consequently, the fresh projections, though numerically weaker than the previous ones, pleased investors as the impact of Irma on the company’s financials was softer than expected. This, in turn, led to the surge in the stock price.
Fuel price per gallon in the third quarter of 2017 is expected between $1.68 and $1.73. Non- fuel nit cost (including profit sharing) is projected to grow at approximately 2.5% on a year-over-year basis. System capacity is projected to improve 1.6%.
The stock price appreciation was not limited to Delta only. Other carriers like American Airlines Group (AAL - Free Report) and JetBlue Airways (JBLU - Free Report) were also boosted by Delta’s projections and saw significant increase in their respective stock prices. Investors interested in these carriers must be hoping that the impact of Irma would be less severe than expected on them similar to Delta.
Traffic Results
Delta unveiled the improved projections while releasing its traffic data for the month of September. While traffic (total system) increased 0.3% year over year, capacity expanded 0.6% for the same month. Nevertheless, load factor (percentage of seats filled by passengers) declined 20 basis points to 84.4% as traffic growth was outpaced by capacity expansion in the same period.
On a year-to-date basis, traffic improved 2.1% while capacity expanded 0.6%. Load factor improved 130 basis points to 85.7%.
Zacks Rank & Stock to Consider
Delta carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in the airline space is SkyWest (SKYW - Free Report) holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SkyWest has witnessed the Zacks Consensus Estimate for current-year earnings being revised 0.6% upward over the last 60 days.
Can Hackers Put Money INTO Your Portfolio?
Earlier this month, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>