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Delta Air Lines Flies High on 2Q16 Earnings

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Nov. 20 2020, Updated 3:36 p.m. ET

Snapshot

Delta Air Lines (DAL) reported its 2Q16 results on July 14, 2016. The company’s revenue fell by 2.4% YoY (year-over-year) to $10.5 billion, while its EPS (earnings per share) rose by 3.5% YoY to $1.47. The company also reported that its passenger unit revenue fell by 4.9% during the second quarter of 2016 as foreign currency swings continued to impact unit revenues.

DAL slightly missed analysts’ consensus estimate for revenue and managed to beat earnings estimates. Analysts had estimated revenues of $10.5 billion and EPS of $1.42. Unit revenues declined slightly more than the top end of DAL’s guidance of a 2.5%–4.5% decline provided at the start of the quarter.

For more details on analysts’ expectations, you can read our pre-earnings analysis on Delta in What to Expect from Delta’s 2Q16 Results.

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Market washes away initial gains

The stock market initially welcomed Delta’s performance, and the stock rose by about 3.6% on the day of the earnings release to close at $40.46. Earlier in July, US airline stocks recorded the highest gain in more than a year. Delta’s reduced capacity guidance for the rest of 2016 also came as good news to investors. We discuss the company’s guidance in more detail later in this series.

However, following the attacks in Nice, France, markets washed away some of the gains on the following day.

Delta Air Lines’ stock fell by ~2% on July 15, 2016. Spirit Airlines’ (SAVE) stock also fell by 2%, United Continental Holdings’ (UAL) stock fell 0.86%, American Airlines’ (AAL) stock fell by 0.56%. Both JetBlue Airways (JBLU) and Allegiant Travel (ALGT) lost 0.3%. Alaska Air Group (ALK) was the only airline to remain flat, while Southwest Airlines was the only airline to post a gain (~0.5%) on the day.

The Consumer Discretionary Select Sector SPDR Fund (XLY) fell slightly by 0.17% on July 15, 2016, while the broader Market, tracked by the SPDR S&P 500 ETF (SPY) was almost flat. We compare airlines to the consumer discretionary sector, as the airline industry is dependent on consumer spending.

Series overview

In this series, we’ll analyze DAL’s performance in 2Q16. We’ll also discuss what factors are expected to drive DAL’s growth in 2016. Finally, we’ll wrap up the series with a discussion on DAL’s valuation multiple.

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