Q1 earnings season is on its way and Delta (DAL - Free Report) is kicking it off for the airlines. This morning DAL posted earnings of $0.96 per share, 11.6% higher than expected and a 28% increase year-over-year. DAL opened up 3% from yesterday but has traded down since and is now sitting at a 1% gain. Delta Air’s CEO Ed Bastian expresses positive forward-looking sentiment, saying that “with the momentum in our business and our American Express contract renewal, we have increased confidence in achieving our full-year plan of top-line growth, margin expansion and double-digit earnings growth.”
Delta saw margin expansion in Q1 with a 0.2% decrease in cost per available seat mile excluding fuel (CASM-Ex) as well as adjusted top-line growth of 7.5% demonstrating both customer loyalty growth and continuous improvement in operational excellence.
Delta is the largest airline in the world by market cap, competing with American Airlines (AAL - Free Report) for most market share. This airline operates in more than 50 countries taking passengers to over 300 destinations and serving nearly 200 million people annually.
DAL’s earnings sets the tone for the rest of the Airlines earnings releases later this month. Competing airline stocks have tracked DAL this morning, opening high, breaking down, and now regaining momentum. American Airlines is up over 1% this morning and JetBlue Airways (JBLU - Free Report) , a smaller player in the space, saw gains of over 3% in this morning’s trading.
The cyclicality of airline stock makes them a useful asset to trade if you can read the markets. You can see the DAL 1-year chart illustrating relatively strong support in the upper $40s and a resistance around $60. These levels will likely increase as the company continues to grow and expand its market share. Keep an eye on oil prices as they have a direct inverse correlation with airline stocks considering it’s a substantial variable cost. I would consider buying DAL as it comes closer to $50 and average down until a trough is hit then ride the wave right back up to $60, if fundamentals don’t change.
Upcoming Airline Earnings
United Airlines (UAL - Free Report) : 4/16
UAL has been effectively flat for the year, underperforming the airline space in 2019, but over the past 52 weeks this stock has seen 30% growth, outperforming the category. United is expect to report $0.94 EPS, which would be 88% growth from Q1 last year. UAL has beat all of the last 6 earnings estimates with positive price reaction from the last 4 reports. UAL is up about 9% over the past 2 weeks demonstrating some possible positive earnings sentiment.
American Airlines Group (AAL - Free Report) : 4/25
AAL has lagged in its category so far in 2019. Their expected earnings has dropped 17% over the past 3 months causing this stock to be a Zacks Rank #4 (Sell) going into earnings. Earnings are expected to be $0.58 per share, 22% lower than last year’s Q1 EPS but revenue numbers are expected to grow over 2% year-over-year. AAL saw positive price action after the past 3 earnings reports even with missing revenue estimates on 2 of those. Like UAL this stock has jumped 12% over the last 2 weeks illustrating some positive market sentiment going into earnings.