Delta Air Lines Inc. saw its stock drop significantly today. A disappointing profit report and a downbeat revenue outlook for Q3 sent shares plummeting.
Key Highlights:
- Profit Miss: Delta’s Q2 profit fell short of expectations.
- Revenue Outlook: Q3 revenue growth outlook below analyst projections.
- Stock Performance: Shares dropped 9.8% in premarket trading.
Disappointing Q2 Results
Delta Air Lines reported Q2 earnings that failed to meet Wall Street expectations. Net income fell to $1.31 billion, or $2.01 per share, down from $1.83 billion, or $2.84 per share, in the same period last year. Excluding nonrecurring items, adjusted earnings per share were $2.36, just below the FactSet consensus of $2.37.
Total operating revenue grew by 6.9% to $16.66 billion. On an adjusted basis, it rose by 5.4% to $15.41 billion, slightly missing the analyst consensus of $15.45 billion.
Breakdown of Revenue:
- Passenger Revenue: Increased by 4.8% to $13.84 billion, missing expectations of $13.94 billion.
- Cargo Revenue: Jumped 15.7% to $199 million, beating expectations of $166.7 million.
- Other Revenue: Rose 18.9% to $2.62 billion, surpassing the FactSet consensus of $1.69 billion.
Load Factor and Capacity
Load factor, which measures the percentage of available seating capacity that is filled with passengers, slipped one percentage point to 87%, below expectations of 87.9%. This drop occurred as traffic increased by 7% and capacity rose by 8%.
Q3 Revenue Outlook: A Cause for Concern
Looking ahead to Q3, Delta expects revenue growth of 2% to 4%. This is significantly lower than the current FactSet revenue consensus of $15.36 billion, which implies a growth of 5.6%. Despite strong summer travel demand and a near-full restoration of international services and core hubs, the rate of aircraft retirement returning to normal will result in decelerating capacity growth in the second half of the year.
Stock Performance and Market Reaction
Delta’s stock (DAL) tumbled 9.8% in premarket trading. This drop puts it on track to open at its lowest price since early March. If the selloff continues, it will mark the seventh consecutive quarter that the stock has suffered a one-day post-earnings decline.
Full-Year Outlook
For the full year, Delta has reiterated its guidance for EPS (Earnings Per Share) of $6 to $7 and for free cash flow of $3 billion to $4 billion. Despite today’s drop, the stock has climbed 16.5% year to date through Wednesday. In comparison, the U.S. Global Jets ETF (JETS) has edged up 1.5%, and the S&P 500 (SPX) has rallied 18.1%.
Conclusion: What’s Next for Delta?
Delta Air Lines faces significant challenges ahead. While strong summer travel demand and a recovering international service are positive signs, the company’s revenue outlook for Q3 and the decline in load factor raise concerns.
Investors will be closely watching Delta’s performance in the coming months. Key factors to monitor include:
- Q3 Revenue Growth: Will Delta meet its modest revenue growth expectations?
- Load Factor Trends: Can Delta improve its load factor in the second half of the year?
- Market Reaction: How will the stock perform in the wake of today’s drop?
Delta’s ability to navigate these challenges will be crucial for its future performance and stock price stability.
Photo credit: Schaeffersresearch
