Delta Air Lines is experiencing a highly successful summer both in the air and in the stock market. As the carrier prepares to release its second-quarter earnings on Thursday, the results will shed light on the current state of the peak travel season and whether this exceptional performance can be sustained.
The stock has witnessed an incredible 15-day winning streak from the Thursday before Memorial Day weekend until June 15, which resulted in a remarkable 23% increase during that period. Even after the streak ended, the shares have continued to climb, posting a significant 48% rise so far in 2023.
The unprecedented success of Delta can be attributed to strong travel demand, particularly from Americans seeking international flights, as well as lower fuel costs. Moreover, Delta recently reinstated its dividend after suspending payouts in March 2020, which contributed to extending the streak for a few additional days last month.
Towards the end of June, the stock experienced another surge after the airline revised its second-quarter earnings guidance. The new range is set between $2.25 and $2.50 per share, surpassing the earlier forecast of $2 to $2.25. Additionally, the full-year guidance has been increased to reach the upper end of the $5 to $6 per-share range.
Given the firm’s recent achievements and the boost in guidance, it will require considerable momentum to push the shares even higher. However, considering the overwhelming success during the record-breaking July Fourth holiday weekend, further gains are certainly within reach.
Over the past few months, expectations have steadily risen as initial concerns about demand and potential consumer weakness during the summer have dissipated. Analysts currently anticipate earnings per share (EPS) of $2.40 on sales amounting to $14.4 billion. This indicates a staggering 67% growth in earnings compared to the same period last year, accompanied by a remarkable 17% increase in revenue.
It’s worth noting that analysts initially projected EPS at $1.63 back in March, highlighting the incredible progress and momentum being enjoyed by Delta Air Lines.
Delta Airlines Poised to Exceed Expectations
The recent surge in air travel, particularly during the busy July Fourth holiday period, suggests that Delta Airlines (DAL) could potentially surpass expectations for the third quarter. On Friday, June 30, the Transportation Security Administration screened a staggering 2.88 million passengers, breaking the previous record set in 2019. Despite some disruptions leading up to the holiday, these challenges are unlikely to have a significant impact on Delta’s earnings.
When it comes to investors, Delta’s third-quarter earnings guidance is the key metric to watch. Analysts are currently predicting earnings per share (EPS) of $2.07. According to expert Conor Cunningham from Melius Research, the airline sector’s second-quarter results are expected to outperform expectations. This success is likely driven by revenue beats and lower fuel costs. Looking ahead to the third quarter, Delta is well positioned to continue its strong performance.
Cunningham highlights that airlines with international exposure, such as Delta, United Airlines (UAL), and American Airlines (AAL), are in a more advantageous position compared to domestic growth airlines. The favorable comparisons and implications for margins make the third quarter an appealing prospect for these airlines.
Despite recently raising its guidance, Delta may offer fewer surprises than some of its competitors. Nevertheless, as the first major carrier reporting this earnings season, Delta’s results will undoubtedly set the tone for the entire sector. Investors will eagerly seek insights from Delta’s performance before assessing the trajectory of United and American Airlines.