Delta Air Lines Reports Mixed Q3 Results Amid Recovery Optimism

Delta Air Lines DAL released its third quarter results on Thursday, providing insights into the domestic airline industry’s performance while United Airlines UAL and American Airlines AAL are set to announce their own Q3 reports in the coming weeks.

While Delta’s financial metrics for Q3 showed discrepancies, the company’s favorable valuation and recovery trajectory from the pandemic continue to attract attention. 

Delta’s Q3 Performance

During Q3, Delta recorded earnings per share (EPS) of $1.50 with an operating income of $971 million. This represents a 26% drop from $2.03 per share in the same quarter last year, which had earnings of $1.31 billion. Additionally, this was below the projected EPS of $1.56, missing by 4%.

This decline can be partly attributed to a significant technology failure earlier in the quarter when a software update from security vendor CrowdStrike CRWD caused thousands of flight cancellations.

Despite these setbacks, Delta’s Q3 sales reached $15.67 billion, exceeding expectations of $15.37 billion by 2% and marking a 1% increase from the previous year, even accounting for a $500 million loss linked to the software issue.

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Future Outlook for Delta

Looking ahead, Delta is optimistic about ongoing recovery trends in travel demand. The airline has noted strong bookings for the Q4 holiday season, projecting record revenue between $14.5 and $14.8 billion, surpassing the current Zacks Consensus estimate of $14.52 billion by 2%.

For the full fiscal year 2024, Delta projects revenue growth of 2% to 4%, aligning with Zacks estimates that predict a 3% growth amounting to $59.85 billion in sales. Looking further ahead, Zacks estimates a total sale increase of 5% in FY25, reaching $62.91 billion.

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Projections for Q4 EPS range from $1.60 to $1.85, which is consistent with the Zacks Consensus of $1.82 per share, reflecting a 42% growth compared to $1.28 a share in Q4 2023 (Current QTR below).

Delta anticipates a full-year FY24 EPS between $6.00 and $7.00, a downgrade from previous guidance of over $7 per share but still in line with estimates of $6.17 per share, representing a 1% decline compared to 2023 figures.

Conversely, FY25 EPS is anticipated to rise by 17% to $7.26, according to Zacks estimates.

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Analyzing DAL’s Stock Performance

Currently trading around $50, Delta’s stock has increased by 25% in 2024, maintaining steady performance throughout today’s trading session. Year-to-date, DAL has seen lesser gains compared to United Airlines’ 47% advance, although it has outperformed the benchmark S&P 500 and American Airlines’ 15% increase.

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Notably, DAL trades at a forward earnings ratio of 8.1X, which is significantly lower than the benchmark’s 24.5X. Furthermore, Delta’s stock is priced below the Zacks Transportation-Airline Industry average of 10.1X, where American Airlines stands at 9.6X and United Airlines at 6.1X.

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Conclusion

With a Zacks Rank #3 (Hold), Delta’s recent Q3 results may not have been stellar, yet the company’s future outlook remains promising. Investing in DAL appears to offer potential rewards, particularly with optimistic guidance in light of the upcoming holiday travel season.

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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report

United Airlines Holdings Inc (UAL) : Free Stock Analysis Report

American Airlines Group Inc. (AAL) : Free Stock Analysis Report

CrowdStrike (CRWD) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.