Delta Air Lines DAL gave a glimpse at how the large domestic airliners are faring after reporting third quarter results on Thursday with United Airlines UAL and American Airlines AAL set to release their Q3 reports in the coming weeks.
Although Delta’s Q3 financial metrics were mixed the company’s valuation and post-pandemic recovery are still enticing.
Delta’s Q3 Results
Delta posted Q3 EPS of $1.50 on operating income of $971 million which decreased 26% from $2.03 per share in the prior year quarter on earnings of $1.31 billion. This also missed Q3 EPS estimates of $1.56 by -4%.
Notably, the year over year decline in Delta’s bottom line was attributed to a global technology outage earlier in the quarter after a malfunction in a software update by security vendor CrowdStrike CRWD led to thousands of flight cancellations.
Still, Delta’s Q3 sales of $15.67 billion beat expectations of $15.37 billion by 2% and was up 1% from a year ago despite incurring a $500 million loss from the faulty software update.
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Tracking Delta’s Outlook
Optimistically, Delta expects improved trends to continue in regards to post-pandemic travel demand, stating bookings for the Q4 holiday season are strong. Delta anticipates record Q4 revenue of $14.5-$14.8 billion which came in above the current Zacks Consensus of $14.52 billion or 2% growth.
Delta’s full-year revenue projections for fiscal 2024 call for 2%-4% growth which fell in line with Zacks estimates of 3% growth or $59.85 billion in sales. Based on Zacks estimates, Delta’s total sales are forecasted to rise another 5% in FY25 to $62.91 billion.
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Fourth quarter EPS projections of $1.60-$1.85 also came in range with the Zacks Consensus of $1.82 per share which would be a 42% increase from $1.28 a share in Q4 2023 (Current QTR below).
Delta now expects full-year FY24 EPS of $6.00-$7.00 compared to previous guidance of over $7 a share although this lines up with estimates of $6.17 per share, a decline of -1% from 2023.
That said, FY25 EPS is projected to rebound and soar 17% to $7.26 based on Zacks estimates.
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DAL Performance & Valuation
Trading around $50, Delta’s stock is up +25% in 2024 and has been virtually flat in today’s trading session. Year to date, DAL has trailed United Airlines' gains of +47% but has slightly edged the benchmark S&P 500’s performance and American Airlines' +15%.
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Most intriguing is that DAL still trades at just 8.1X forward earnings and at a steep discount to the benchmark’s 24.5X. Delta’s stock also trades beneath its Zacks Transportation-Airline Industry average of 10.1X forward earnings with American Airlines at 9.6X and United Airlines at 6.1X.
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Bottom Line
Delta’s stock currently lands a Zacks Rank #3 (Hold). While Delta’s Q3 results weren’t overwhelming the company’s outlook remains attractive. Futhermrore, holding DAL may certainly be rewarding given Delta's upbeat guidance for the upcoming holiday season.
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