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Why is Delta (DAL) Down 1.7% Since its Last Earnings Report?

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It has been about a month since the last earnings report for Delta Air Lines, Inc. (DAL - Free Report) . Shares have lost about 1.7% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is DAL 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 drivers.

Recent Earnings

Delta’s first-quarter earnings (excluding 3 cents from non-recurring items) of 74 cents per share surpassed the Zacks Consensus Estimate by a penny. However, the bottom line contracted 3.9% on a year-over-year basis. High fuel costs led to the year-over-year decline. The winter storms, which led to multiple flight cancellations, have also hurt results in the reported quarter.

Operating revenues came in at $9,968 million, outpacing the Zacks Consensus Estimate of $9,881.2 million. The top line increased 8.9% from the year-ago figure. Strong demand for air travel boosted revenues.

In the quarter under review, passenger revenues, cargo revenues and others increased 7%, 23% and 32%, respectively, on a year-over-year basis. Average fuel price (adjusted) was up 18% to $2.01 per gallon.

Operating Statistics

Revenue passenger miles (a measure of air traffic) increased 2.8% on a year-over-year basis. Additionally, capacity or available seat miles expanded 2.7%. Load factor (percentage of seats filled by passengers) came in at 82.9%, flat year over year.

Passenger revenue per available seat mile (PRASM) was up 4.3% year over year.  In addition, passenger mile yield grew 4.3%. Total revenues per available seat miles (TRASM: adjusted) also increased 5% (on a year-over-year basis) in the first quarter.

Operating Expenses

Total operating expenses, including special items, were up 13% year over year to $9,128 million. Cost per available seat mile (excluding fuel and profit sharing) rose 3.9%, owing to wage increases and other factors.

Liquidity

At the end of the first quarter, Delta had $1.45 billion in cash and cash equivalents and $6.36 billion long-term debt and capital leases. Operating cash flow and free cash flow in the quarter were $1.3 billion and $173 million, respectively.

Guidance

For the second quarter of 2018, the carrier expects earnings per share between $1.80 and $2. It anticipates pre-tax margin in the range of 14-16% for the same quarter. Also, the estimated fuel price, including taxes and refinery impact, is expected in the range of $2.07-$2.12 per gallon. Robust top-line growth coupled with an improvement in the cost-related scenario is expected to mitigate the impact of rising fuel prices.

Total unit revenue, excluding refinery sales, is anticipated to increase in the 3-5% range in the second quarter. System capacity is expected to be up approximately 3-4% on a year-over-year basis. Cost per available seat mile, excluding fuel and profit sharing, is projected to increase in the band of 1-3% in the quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been three revisions higher for the current quarter compared to three lower.

Delta Air Lines, Inc. Price and Consensus

 

Delta Air Lines, Inc. Price and Consensus | Delta Air Lines, Inc. Quote

VGM Scores

At this time, DAL has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

DAL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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