Delta Earnings Preview: Positive PRASM Growth Expected To Continue
Delta Air Lines (NYSE:DAL), in the year thus far, has failed to impress investors much. Profits contracted hard since Q1 on the back of adverse weather conditions, and higher than expected fuel and labor costs. That said, the company continues to report positive year-over-year growth in PRASM. As before, the company has managed to accomplish this feat by limiting capacity, especially in the Pacific and Atlantic regions.
Despite the troubled first half of the year, the company expects to achieve the lower end of the long-term targets that were most recently revised in May this year. Over the next three years, the airline targets to earn operating margins in the 16-18% range, with an EPS growth of about 15%, while taking in $4.5 billion to $5.5 billion of free cash flows.
Updated Financial Guidance For Q3:
- Delta expects the metric to lie within the lower, but healthy, 2-3% range, as the recovery in domestic close-in yields have been slower than expected.
- In terms of fuel costs, the airline expects to post a cost figure that is expected to range between $1.68-$1.73. The costs are driven primarily by the increase in oil market prices that began in late July.
- Delta now expects the CASM (or cost per available seat mile) to come in around 2% higher y-o-y. This is mainly due to increased wage and repair costs.
- Lastly, the company expects to see an operating margin of about 16.5-17.5%, down from the previous estimate of 18-20%. The revision was deemed necessary as higher fuel prices and close-in yield softness resulted in a 2 point margin pressure in the quarter.
- What’s Next For Delta Air Lines Stock After 10% Gains In A Month And An Upbeat Q1?
- Should You Pick Delta Stock Around $40 After Its Q4 Beat?
- After Over 20% Gains In 2023 Will Delta Air Stock Outperform Alaska Air?
- Should You Pick Delta Stock At $34 After Q3 Beat?
- What To Expect From Delta’s Q3?
- Which Is A Better Pick – Delta Stock Or United Airlines?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Delta Airlines
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap