Why is Delta Down 5% Despite Impressive November Traffic?

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Delta Air Lines, Inc . DAL has delivered encouraging traffic figures for November. Consolidated traffic, measured in revenue passenger miles (RPMs), came in at 16.83 billion, up 4.2% year over year.

Consolidated capacity (or available seat miles/ASMs) climbed 3.8% to 19.62 billion on a year-over-year basis. Moreover, consolidated load factor or percentage of seats filled by passengers expanded 40 basis points (bps) to 85.8% as traffic growth exceeded capacity expansion.

Additionally, the carrier recorded an on-time performance (mainline) of 83.2% and a completion factor (mainline) of 99.9%. Approximately, 15.5 million passengers boarded Delta in the month.

On a year-to-date basis, the airline generated consolidated RPMs of 207.62 billion (up 3.3% year over year) and ASMs of 242.43 billion (up 3.4% year over year). However, load factor in the period came in at 85.6% compared with 85.7% at the end of the same time frame a year ago.

Delta Air Lines, Inc. Price

Delta Air Lines, Inc. Price | Delta Air Lines, Inc. Quote

Q4 View Tweaked

The company anticipates fourth-quarter 2018 earnings per share at the upper end of the guided range of $1.10-$1.30. The Zacks Consensus Estimate for the same stands at $1.23. Revenues (excluding third-party refinery sales) are now estimated to augment approximately 7.5% in the ongoing quarter. However, this projection is slightly lower than the previous view of an 8% increase. Meanwhile, unit revenues are expected to rise 3.5% year over year in the current quarter. Previous outlook showed a 3-5% improvement.

Given Delta's robust performance this Thanksgiving and the recent drop in oil prices , this forecast is certainly a cautious one, especially considering the fact that fellow players like Alaska Air Group ALK and Spirit Airlines SAVE have provided an upbeat guidance on the back of these tailwinds.

While Alaska Air Group now envisions fourth-quarter unit revenues between 12.60 cents and 12.80 cents (earlier view: 12.40-12.60 cents), reflecting an increase of 3-5%, Spirit predicts the same to rise approximately 11% (past view had called for an approximate 6% increase). This skepticism perhaps struck the investors, causing shares of the company to decline more than 5% at yesterday's close despite delivering impressive traffic results.

Meanwhile, the company hopes to generate higher pre-tax margins during the fourth quarter owing to waning oil prices and its measures to curb non-fuel costs.

Zacks Rank & Key Pick

Delta carries a Zacks Rank #3 (Hold). A better-ranked stock in the airline space is International Consolidated Airlines Group ICAGY , which flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

The International Consolidated Airlines stock also boasts a commendable earnings history, having outperformed the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 92.9%.

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Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report

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

International Consolidated Airlines Group SA (ICAGY): Free Stock Analysis Report

Alaska Air Group, Inc. (ALK): 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.

This article appears in: Investing , Business , Stocks
Referenced Symbols: SAVE , DAL , ICAGY , ALK

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