Wednesday, July 12, 2017

Delta Earnings Cheat Sheet: Reports Tomorrow Morning


Delta Air Lines (DAL) quarterly results report tomorrow morning. The street is looking for earnings of $1.65 or a 12% increase for Q2. The Street is expecting earnings of $1.76 +4% for Q3. Year ago earnings slowed throughout last year which makes it easier to show earnings growth later this year.

Earnings Fundamentals Getting Better

Their key metric, RASM (Revenue per available seat mile) has been moving up through 2017. As we go into the back half that should help drive earnings and the stock. The global economy has been picking up which should help this key metric.

There was also some recent insider buying which may point to management confidence.

Energy prices also dropped in Q2 which should benefit Delta stock.

The company has a history of beating earnings forecasts but more importantly the stock has traded up 70% of the time after quarterly reports which is very good.  That means traders and hedge fund managers typically like what they hear on earnings reports.

Delta Technical Analysis Looks Good

dal delta chart
The $55 share price is a key level for Delta and it looks like it held and went higher. 

Quarterly reports are important data for stock prices. Holding above or below the $55 share price by the close should be meaningful. We’d guess it can hold higher. If it were to break lower though we don’t see it as worrisome because the fundamentals are decent.

The stock does not have high short interest at 3% of the float but short interest did jump which would mean to us good news can get the stock up on short covering.

Here's what the company said last quarter about current business and expectations,

"We feel confident that we have turned the corner on positive RASM and we will continue to stay conservative with our capacity levels to help firm the unit revenue trends. For the June quarter, our capacity will be flat to up 1% with approximately 2 points of domestic growth and roughly 1.5 point decline in international. Our unit revenues will be up in the 1 to 3 range for the June quarter, which is 0.5 point lower than our expectations were last week before the storms in Atlanta. This will be driven primarily by continued momentum in our domestic unit, which we are expecting to be up between 3% and 4%. We are seeing a good start to the quarter and the month of April may potentially still be positive, including a 2 point to 3 point negative system RASM hit related to the storm impact. And given what we are seeing in this quarter and further out, we feel that we are well positioned to deliver top line growth through positive RASM going forward."

We do not have a rating on Delta but the setup looks bullish.

By: Chaim Siegel, Elazar Advisors, LLC 

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Elazar Advisors, LLC are guided by our daily, weekly and monthly methodologies. We have a daily overlay which changes more frequently which is reported to our premium members and could differ from the above report. Portions of this report may have been issued in advance to subscribers or clients. All investments have many risks and can lose principal in the short and long term. This article is for information purposes only. Ratings are based on hypothetical trade directions. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC and their related parties harmless. Any trading strategy can lose money and any investor should understand the risks.
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