Delta Air Lines (DAL 51.91, -0.79, -1.50%) will report third quarter results on
Thursday morning at 7:00 AM. Management will host a conference call at 10:00.
Last Tuesday, Delta pre-announced in-line third quarter results in conjunction with its September traffic report.
Delta narrowed third quarter EPS to $1.70-1.80 from 1.65-1.85 and guided pre-tax margin to 13% versus its original projection of 12-14%.
The company also narrowed third quarter unit revenue guidance to 4.0-4.5% growth from 3.5-5.5%. Delta said Hurricane Florence negatively impacted pre-tax income by $30 mln and unit revenue by 50 basis points. Still, unit revenue was healthy thanks to strong demand and improving yields.
Market fuel prices increased 35% in the third quarter. Non-fuel unit costs were flat year/year, in-line with guidance, marking a significant 3% drop sequentially.
Last quarter, Delta lowered EPS and capacity guidance in response to higher fuel prices while raising revenue, non-fuel unit cost guidance and the company's dividend. Delta called for fiscal 2018 adjusted EPS of $5.35-5.70, with total revenue up 7-8%. It takes Delta 6-12 months to recapture higher fuel costs by passing them through to customers via higher fares.
Focus will be on fourth quarter guidance because the company has pre-announced most metrics for the third quarter.
Delta stock was testing resistance near the $60 level at an eight-month/all-time high in late September before a breakout in crude oil prices started to weigh on airline stocks. A broader market correction has quickly brought Delta shares to an eleven-week low.
Delta is the largest US carrier in terms of enterprise value at ~$45 bln. Southwest (LUV) trades with an enterprise value over 7x adjusted profit (EBITDA) estimates for the year while Delta and American (AAL) trade at 5.5x EV/EBITDA and United (UAL) trades at 5x.
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