Delta Air Lines (DAL) will report third quarter results on Wednesday morning. The company usually reports and 7:00 AM and management will host a call at 10:00.
Last week, Delta reported September operating data and lowered third quarter unit revenue and operating margin guidance due to the impact of Hurricane Irma. The stock surged as the update was evidently better than feared following the hurricanes amid the competitive domestic airline market.
Hurricane Irma significantly impacted operations with 2,200 flights cancelled from Sept 7-12 at airports in Florida, the Caribbean, and Georgia, including the company's Atlanta hub. As a result, Delta lowered third quarter passenger revenue per available seat mile (PRASM, or unit revenue) to +2% from +2-3% (including a one-point headwind from Hurricane Irma) and lowered operating margin guidance to 15.5-16.5% from 16.5-17.5% (including a one point margin hit from Irma). Delta also said unit costs would be up 5% including profit sharing in the third quarter while capacity rose 1.6%.
With pertinent top-line and margin profiles set for the third quarter, the focus turns to the company's unit revenue (PRASM) and operating margin guidance for the fourth quarter. Expectations are for PRASM growth to slow a bit versus the +2% in Q3 with operating margins also a little lower quarter over quarter. The domestic market remains competitive.
The new profit sharing agreement announced last month may be another topic of interest as management tries to please both employees and shareholders.
Delta's 2018-2020 framework includes a 16-18% operating margin, 15%+ earnings per share growth, and $4.5-5.5 billion in free cash flow.
At $37 billion, Delta has the largest market cap among domestic carriers while the ~5x EV/EBITDA multiple is in-line with the industry average.