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Here’s What Delta Expects from Its Q2 Results
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Here’s What Delta Expects from Its Q2 Results

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Delta will kick off the airline industry’s second-quarter earnings season tomorrow. Sentiment is positive for the quarter on the back of robust summer travel demand and high ticket prices.

One of America’s biggest air carriers, Delta Airlines (NYSE: DAL), will release its second-quarter fiscal 2022 results on Wednesday, July 13, before the market opens. DAL will also be the first airline company to report for the latest quarter, portending the current health of the sector and future expectations.

Over the last four quarters, Delta has consistently outperformed earnings expectations.

Delta’s Q2 Expectations

The company expects its Q2 adjusted revenue to be fully restored to 2019 levels, up from its previous forecast of being between 93% and 97% of pre-pandemic levels. Additionally, operating margins are expected to be between 13% and 14%.

Moreover, Delta expects to report adjusted operating income per available seat mile (ASM) of around 2.70 cents, much higher than the industry average of around 1.68 cents. Meanwhile, the consensus earnings per share (EPS) figure is pegged at $1.66.

The company is confident in its ability to improve financial results beyond the record 2019 levels. Its 2024 financial targets include achieving an adjusted total revenue of more than $50 billion and an adjusted earnings per share of above $7.

Jefferies Analyst is Bullish on Delta

Ahead of the airline industry’s earnings season, Jefferies analyst Sheila Kahyaoglu published a 2Q preview report for all major airlines. The analyst maintained a Buy rating and a $50 (70.7% upside potential) price target for Delta Airlines.

As Kahyaoglu noted, “Similar to business jets, airlines cannot seem to get their day in the sun. With positive price momentum Q2 unit revs should be better. However, concerns linger on what drives demand in the fall given a weakening consumer and limited visibility. We are most positive into the Q on DAL as premium offering provides more ability to drive short-term yields.”

The analyst estimates DAL will report Q2 adjusted revenue of $12.5 billion, in line with 2019 levels and slightly better than the consensus of $12.1 billion. Furthermore, Kahyaoglu also forecasts DAL to post EPS of $1.74, much higher than the consensus.

With 12 Buys versus one Hold rating, DAL stock commands a Strong Buy consensus rating. The average Delta Airlines price forecast of $51 implies 74.1% upside potential to current levels. Meanwhile, the stock has lost 27.3% so far this year.

Delta’s Website Traffic Portends Positive Patterns

To gauge the company’s performance ahead of its Q2 earnings, we used TipRanks’ Website Traffic tool to track user visits to its website. Interestingly, the tool provided positive patterns on the website, which may be encouraging to investors.

As per the tool, in Q2, we see that the total estimated worldwide visits to delta.com increased by a whopping 18.85% compared to the prior quarter. Furthermore, quarter-over-quarter, the estimated website traffic visits grew by 25.53% in Q2, with June alone contributing a robust growth of 32.85%.

Bottom Line

After witnessing a surreal rebound in air travel demand at the onset of 2022, airlines have been squirming with fears of a lurking recession.

The pent-up demand in air travel due to the COVID-19-related lockdowns has opened up the skies for demand from travelers of all segments, including leisure and business, across both domestic and international tourism. Even though airlines increased ticket prices to adjust for the war-induced record-high fuel prices, travelers continued to post record bookings across all carriers.

Nonetheless, the recessionary fears and intermittent Omicron resurgence are creating another bottleneck for the airline industry, which is already struggling to ramp up its capacity amid an acute staff shortage. After delaying and canceling thousands of flights on holidays and weekends, airlines are trying all means to retain crew and employees by offering better packages and benefits.

Meanwhile, Delta’s website traffic data and analyst views both display optimism about the company’s second-quarter performance. Although macroeconomic headwinds are affecting all the sectors at large, the airline industry-specific tailwinds showcase a compelling opportunity. Delta is sure to at least report in line with Wall Street expectations, if not surpass them. Notably, the stock’s trajectory will be decided by what the air carrier anticipates for the upcoming quarter.

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