It has been more than a month since the last earnings report for Delta Air Lines, Inc. (DAL - Free Report) . Shares have lost about 7.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Delta’s third-quarter 2017 earnings (excluding 7 cents from non-recurring items) of $1.57 per share beat the Zacks Consensus Estimate of $1.54. Earnings, however, declined 7.6% on a year-over-year basis due to higher costs.
Operating revenues came in at $11,060 million, surpassing the Zacks Consensus Estimate of $11,036.6 million. Revenues increased 5.5% from the year-ago figure.
During the quarter, passenger revenues, cargo revenues and others increased 3.6%, 11.5% and 18.4%, respectively, on a year-over-year basis. Average fuel price (adjusted) was up 13.2% to $1.68 per gallon.
Revenue passenger miles (a measure of air traffic) increased 3.4% to approximately 61 billion. Capacity or available seat miles expanded 1.6% to 70.2 billion. Load factor (percentage of seats filled by passengers) improved 150 basis points year over year to 86.9% as traffic growth outpaced capacity expansion in the quarter, leading to packed planes.
PRASM was up 1.9% year over year. In fact, this was the second successive quarter in which the carrier recorded quarterly unit revenue growth since the fourth quarter of 2014. In addition, passenger mile yield grew 0.2%.
Total operating expenses, including special items, increased 8% year over year to $9,221 million. Non-fuel consolidated unit cost or cost per available seat mile (CASM: normalized), including profit sharing, rose 2.6%, mainly owing to wage increases, product investments and accelerated depreciation pertaining to the carrier’s narrowbody fleet initiatives.
At the end of the third quarter, Delta had $1.48 billion in cash and cash equivalents and adjusted net debt of $8.8 billion. Operating cash flow and free cash flow in the quarter generated by the company were $1.6 billion and $471 million, respectively.
For the fourth quarter of 2017, the carrier expects operating margin in the range of 11% to 13%. Fuel price, including taxes and refinery impact, is expected between $1.82 and $1.87 per gallon in the final quarter of the year. System capacity is expected to be up approximately 2% on a year-over-year basis.
The company expects passenger unit revenues to increase in the band of 2% to 4% (on a year-over-year basis) in the fourth quarter. Non-fuel consolidated unit cost (normalized), including profit sharing, is expected to increase in the band of 4% to 5% in the fourth quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, the stock has a poor Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, stocks has an aggregte VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.