Delta Air Lines, Inc. (DAL – Free Report) is scheduled to report third-quarter 2017 results on Oct 11, before the market opens.
This Atlanta, GA-based carrier’s second-quarter earnings of $1.64 per share missed the Zacks Consensus Estimate of $1.66. However, earnings climbed 11.56% on a year-over-year basis on the back of a 3.3% operating revenue growth. Meanwhile, quarterly operating revenues of $10.79 billion fell short of the Zacks Consensus Estimate.
In fact, the carrier may be in for a disappointment in the third quarter too. The negative sentiment surrounding the stock can be gauged from the fact that the Zacks Consensus Estimate for the third quarter has decreased in excess of 14% over the last three months.
Owing to multiple headwinds, the stock has struggled so far this year, underperforming the Zacks Transportation-Airline industry on a year-to-date basis. The stock has gained 5.7%, whereas the industry has rallied 15.2%.
Our proven model too does not show conclusively that Delta Air Lines will beat earnings in third-quarter 2017. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case as highlighted below.
Zacks ESP: The Earnings ESP for Delta Air Lines is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.54 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Delta Air Lines carries a Zacks Rank #5 (Strong Sell).
In fact, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when it is witnessing negative estimate revisions like Delta Air Lines is.
Factors Likely at Play
We expect Delta Air Lines’ third-quarter results to be hurt by the back-to-back hurricanes which resulted in the carrier cancelling multiple flights. Delta Air Lines expects passenger unit revenues to increase approximately 2% in third-quarter 2017 on a year-over-year basis. The guidance includes a negative impact of Irma to the tune of 1 point. Operating margin for the third quarter is projected between 15.5% and 16.5%; Hurricane Irma is likely to impact the metric to the tune of approximately 120 million.
