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Delta (DAL) to Report Q1 Earnings: A Beat in the Offing?

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Delta Air Lines (DAL - Free Report) is scheduled to report first-quarter 2019 results on Apr 10, before market open.

The company delivered a positive earnings surprise in the last reported quarter. Also, it boasts an impressive earnings history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 4.2%.

Things seem to be looking up for the company this soon-to-be-reported quarter as well with the Zacks Consensus Estimate for first-quarter earnings being revised 1.2% upward over the last 7 days.

Why a Likely Positive Surprise?

Our proven model shows that Delta is likely to beat on earnings this reporting cycle  as it has the perfect combination of the following two key ingredients.

Earnings ESP: Delta has an Earnings ESP of +0.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Delta currently carries a Zacks Rank #3 (Hold). Notably, the stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of beating estimates.

Thus, the above combination makes us reasonably confident of a likely earnings surprise in the upcoming reporting cycle.

Conversely, stocks with a Zacks Rank #4 or 5 (Sell rated) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Likely at Play

On the unit revenue front, Delta is expected to perform well despite headwinds like the 35-day partial government shutdown. In fact, the carrier expects total revenue per available seat mile (TRASM) to increase approximately 2%. The upside can be primarily attributed to healthy corporate-travel demand. Moreover, the extension of the credit card deal between Delta and American Express (AXP - Free Report) is likely to first-quarter TRASM to the tune of 1 point.

The Zacks Consensus Estimate for first-quarter passenger revenue per available seat mile (PRASM) is pegged at 14.78 cents, above 14.74 cents reported a year ago. However, the estimate is below 15.43 cents registered in the fourth quarter of 2018.

For first-quarter TRASM, the consensus mark stands at 16.70 cents, lower than 17.18 cents posted fourth-quarter 2018. The partial government shutdown, which resulted in fewer government contractors and employees traveling, might be responsible for the lower projection. After all, Delta’s CEO Ed Bastian had mentioned that the longest-ever political standoff did cost the company $25 million in revenues during January, 2019.

However, with oil prices declining in excess of 20% from the highs of $76 a barrel touched in October 2018 levels, operating expenses should be reduced, thereby supporting bottom-line growth. Average fuel price is estimated between $2.03 and $2.08 per gallon for soon-to-be- reported quarter. The mid-point of the guided range is much lower than the $2.42 posted in the fourth quarter of 2018.

Moreover, cost control measures have aided non-fuel costs. The metric for the soon-to-be-reported quarter is expected to either remain flat or increase up to 0.5% year over year. This should aid bottom-line growth as well.

Other Stocks to Consider

Investors interested in the Zacks Transportation sector may also consider Ryder System (R - Free Report) and Werner Enterprises (WERN - Free Report) as these stocks too possess the right mix of elements to beat on earnings in the next releases.

Ryder has an Earnings ESP of +3.44% and a Zacks Rank of 3. The company is scheduled to release first-quarter earnings on Apr 30.

Werner Enterprises has an Earnings ESP of +1.75% and a Zacks Rank of 3. The company will report its first-quarter financial numbers on Apr 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

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