Delta Air Lines (NYSE:DAL) is scheduled to announce its third-quarter results on Thursday, October 13. Based on the company’s guidance, it expects Q3 revenue growth in the range of 1% to 5% compared to pre-pandemic levels, even as capacity is estimated to be 15% to 17% below 2019 levels.
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Delta also reassured investors that it expects “meaningful profitability in 2022.” The company delivered mixed Q2 results, with earnings lagging expectations while revenue surpassed the Street’s estimates.
Delta’s Q2 revenue grew 10% to $13.8 billion compared to pre-pandemic levels. However, adjusted earnings per share (EPS) of $1.44 were 39% below 2019 levels, reflecting the impact of staff-related operational disruptions and increased costs.
Meanwhile, analysts expect Delta’s Q3 adjusted EPS to come in at $1.54 and revenue of $13.3 billion. Analysts’ revenue consensus is above the company’s Q3 2019 revenue. However, adjusted EPS is below 2019 levels, reflecting the impact of higher fuel costs and wages.
The expectations from Delta will be high as yesterday American Airlines upgraded its Q3 revenue guidance, ahead of its results scheduled on October 20. Previously, United Airlines also announced a favorable update to its Q3 revenue outlook.
Delta Invests in Electric Air Taxi Startup Joby
In an interesting update, Delta has made an upfront equity investment of $60 million in Joby Aviation (JOBY), a leading electric air taxi startup, to offer a “home-to-airport” transportation service, beginning in New York and Los Angeles. Joby will operate all-electric, vertical takeoff and landing (eVTOL) aircraft, which will enable fast city-to-airport service by air.
Under a multi-year partnership between the two companies, Delta’s investments could go up to $200 million if further milestones are achieved. Joby stock rose 7.5% on Tuesday in reaction to the news.
Electric aircraft that take off and land vertically have gained the attention of Delta’s rivals United Airlines and American Airlines as well.
Is Delta a Buy or Sell?
Heading into Q3 results, Raymond James analyst Savanthi Syth opined that United and Delta are in a “relatively stronger position” when it comes to top-line recovery compared to their peers.
The analyst pointed out Delta’s key strengths relative to its rivals, including comparatively lower debt levels, lack of a massive aircraft order book, and a solid track record of capital deployment. Syth raised the price target for Delta stock to $52 from $50 and reiterated a Buy rating.
Overall, the Street’s Strong Buy rating for Delta Airlines stock is based on 10 Buys and one Hold. The average DAL stock price target of $44.85 implies 55.5% upside potential.
