Delta cut the forecast
On June 6, Delta Air Lines (DAL), which took part in the Deutsche Bank (DB) Global Industrials and Materials Summit, announced its earnings expectations for the June quarter. Delta cut its EPS to $1.65–$1.75 compared to the earlier guidance of $1.80–$2.0. American Airlines, the world’s largest carrier, made a similar move in April.
Delta said that increased fuel prices caused the downward revision. Delta expects its average price per gallon of fuel to be $2.20–$2.25—an increase of ~40% on a year-over-year basis. In the second quarter of 2017, Delta’s average price per gallon was $1.61.
In the past year, fuel prices have increased ~50% and ~12% since the beginning of the second quarter. However, Brent crude oil prices have declined 5% from the peak. OPEC might increase the oil output by 1 million barrels per day, which could bring more relief.
Delta’s stock price fell as much as 3.7% intraday before recovering and closing at $54.17—down 0.9%. JetBlue Airlines (JBLU) and Southwest Airlines (LUV) declined 0.5% and 0.3%, respectively, while American Airlines (AAL) remained flat.
Investors could hold Delta Air Lines indirectly by investing in the iShares Transportation Average ETF (IYT). IYT has invested 3.3% of its portfolio in Delta.