Image courtesy of 123rf.com
Delta Air Lines (NYSE: DAL) reported mixed second-quarter results and a disappointing third-quarter forecast on Thursday, sending shockwaves through the airline industry. The news comes as U.S. carriers grapple with excess capacity and pricing pressures, leading to a broad selloff in airline stocks.
Delta’s Third-Quarter Forecast Fell Short of Wall Street Estimates
Delta Air Lines posted record second-quarter operating revenue of $16.7 billion, with adjusted operating revenue reaching $15.4 billion, slightly below analyst expectations of $15.47 billion.
The company’s adjusted earnings per share of $2.36 met expectations, while operating income stood at $2.3 billion with a 14.7% operating margin. Delta also reported strong cash flow, with $2.5 billion from operations and $1.3 billion in free cash flow.However, Delta’s third-quarter forecast fell short of Wall Street estimates. The airline projects earnings per share between $1.70 and $2.00, below analyst expectations of $2.05. Revenue growth is anticipated to be 5% to 7% year-over-year, with an operating margin forecast of 11% to 13%.
The company cited several factors for the lower outlook, including discounting pressure in the low-end market, reduced transatlantic bookings due to travelers avoiding Paris during the Olympic Games, and increased non-fuel operating costs from moderated capacity growth.
Airline Stocks Face Turbulence After Delta’s Q2 Results
The disappointing forecast from Delta triggered a broader selloff in airline stocks. As of 11:00 AM EDT on July 11, 2024, Delta shares were down 2.82% to $46.86.
United Airlines (Nasdaq: UAL) saw a more significant drop of 16.07% to $47.15, while American Airlines (Nasdaq: AAL) plummeted 40.69% to $11.15. Southwest Airlines (NYSE: LUV) also experienced a substantial decline, falling 27.80% to $27.63.Other carriers were not immune to the industry-wide turbulence. Spirit Airlines (NYSE: SAVE) and Frontier Group Holdings (Nasdaq: ULCC) have seen year-to-date declines of 83.33% and 60.13%, respectively. JetBlue Airways (Nasdaq: JBLU) is down 36.73% for the year. In contrast, SkyWest (Nasdaq: SKYW) has been a rare bright spot, posting a year-to-date gain of 100.60%.The airline industry is facing significant headwinds, with excess capacity undermining pricing power. Domestic seat capacity is up 6% year-over-year, while average round-trip ticket prices in May were down 3% compared to the previous year.More By This Author:Wall Street Weighs In As Pfizer Targets $100 Billion Weight Loss Market
Delta Air Lines Misses Revenue Expectations In Q2, EPS In Line
PepsiCo’s Q2 2024 Shows 0.8% Year-Over-Year Revenue Growth, EPS Beat
