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Delta's (DAL) June Traffic Rises, Q2 Earnings View Intact

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Delta Air Lines, Inc. (DAL - Free Report) reported traffic figures for June. Traffic, measured in revenue passenger miles (RPMs), came in at 21.45 million, up 3% year over year. Consolidated capacity (or available seat miles/ASMs) also expanded 3% to 24.23 million on a year-over-year basis.

As traffic growth was commensurate with capacity expansion, load factor in the month remained flat. Additionally, the Atlanta, GA-based airline recorded an 81.5% on-time performance and 99.9% completion factor (mainline) for the period under review.

At the end of the first six months of 2018, the carrier generated consolidated RPMs of 108.68 million (up 3% year over year) and ASMs of 127.97 million (up 3.1% year over year). Load factor for the time frame was 84.9% as compared to 85% recorded at the end of the first six months of 2017.

Q2 Guidance

The company has reiterated its outlook for the second quarter of 2018. It continues to expect earnings per share of $1.65-$1.75. The Zacks Consensus Estimate for second-quarter earnings stands at $1.75 per share. Additionally, pre-tax margin is anticipated between 13% and 14%. Total unit revenues are still expected to increase 4-5% as demand remains strong across all entities in leisure and business segments, aiding the company in countering the approximate 50% spike in fuel prices.

Meanwhile, non-fuel unit costs are likely to rise approximately 3% year over year. The company also continues with its objective of delivering non-fuel unit growth of less than 2% in the year. Fuel prices are projected between $2.20 and $2.25 per gallon.

However, system capacity is now anticipated to grow approximately 3.5%, the previous forecast was an increase in the 3-4% range. Tax rate in the to-be-reported quarter is estimated to be around 23%.

Zacks Rank & Key Picks

Delta carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are GATX Corporation (GATX - Free Report) , Atlas Air Worldwide Holdings and Expeditors International of Washington, Inc. (EXPD - Free Report) . While GATX holds a Zacks Rank #2 (Buy), Expeditors and Atlas Air Worldwide sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of GATX, Atlas Air Worldwide and Expeditors have rallied more than 14%, 30% and 26%, respectively, in a year.

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