HomeMarket NewsMicro Cap StocksDelta Air Lines Reports Soaring Profits Amid Robust Travel Demand

Delta Air Lines Reports Soaring Profits Amid Robust Travel Demand

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Delta Air Lines, ticker symbol DAL, experienced a remarkable increase in profit by nearly 60% in its latest reported quarter, as a result of strong travel demand during the summer. Despite this success, the airline has revised its full-year earnings estimate to the lower end due to rising fuel prices. United Airlines Holdings Inc (ticker symbol UAL) and American Airlines Group (ticker symbol AAL) are also scheduled to release their quarterly results this week, giving investors further insight into the industry’s performance.

Highlights from the Third Quarter

For the quarter ending on September 30th, Delta Air Lines generated $14.55 billion in revenue, marking a 13% year-over-year increase. Although the sales figure fell slightly short of the expected $14.56 billion, the airline experienced strong international travel demand, particularly in the Trans-Atlantic sector. However, it did face some challenges due to ongoing strikes in the automotive and entertainment industries.

Net income saw a substantial YoY growth of 59% to $1.11 billion, or $1.72 per share. Adjusted earnings, which exclude third-party refinery sales and other items, exceeded the expectation set by LSEG by 8 cents, reaching $2.03 per share.

Outlook for the Future

Delta Air Lines anticipates that solid travel demand will continue into the last three months of the year, projecting a YoY revenue expansion of 9% to 12%. The airline’s per-share earnings guidance falls within the range of $1.05 to $1.30, aligning with estimates. However, fuel price increases since July will add an additional $400 million in costs during the second half of the year, resulting in an adjusted earnings forecast between $6 and $6.25 per share, lower than the earlier estimate of $6 to $7 per share. Additionally, the full-year free cash flow estimate has been reduced from $3 billion to $2 billion.

Delta’s Competitive Advantage

Despite some concerns regarding consumer spending habits, Delta Air Lines CEO Ed Bastian assures investors that the airline’s customers remain financially stable. He further states that the demand for overseas travel remains strong even as autumn progresses. However, the performance of United Airlines and American Airlines in this regard is yet to be determined. It’s worth noting that Delta’s competitor Spirit Airlines Inc (ticker symbol SAVE) recently lowered its profit outlook for the third quarter due to intense promotional activity and steep discounting. Similarly, Frontier Group Holdings (ticker symbol ULCC) offers very low fares to boost ticket sales. Nevertheless, Delta Air Lines has set a high standard for United Airlines and American Airlines. While Bastian acknowledges the pressure of discounting, he does not consider it a β€œmaterial risk” to Delta since its core consumers are not the ones purchasing the lower fares, just like the consumers of United Airlines and American Airlines, who prefer traditional airlines.

DISCLAIMER: This content is for informational purposes only and should not be considered as investment advice.

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