Delta Air Lines Inc. (NYSE: DAL) investors are bracing for some turbulence this week when the airliner reports earnings from a fourth quarter that included a power outage in a major travel hub. Delta shares dropped 2.3 percent ahead of Thursday morning’s report.
Last week, Delta updated its fourth-quarter guidance and said it would likely take a $25 million to $50 million pretax income hit from a major Atlanta power outage in December that resulted in more than 1,400 flight cancellations. In addition, the company said non-fuel costs likely rose 5.5 percent in the quarter, on the high end of its previous guidance range.
Wall Street analysts are expecting Delta to report earnings per share of 90 cents on revenue of $10.16 billion. Those numbers would represent 9.7 earnings growth and 7.8 percent revenue growth compared to a year ago.
Delta also expects to report passenger unit revenue growth of 4 percent and stable operating margins of about 11 percent. The airline cut its guidance for flight capacity growth from a previous range of 2.5 to 3 percent to a new target of 2.3 percent.
Delta investors will also be watching for a current-quarter update following the massive winter storm that hit the U.S. in the opening week of 2018 causing more than 4,000 flight cancellations.
J.P. Morgan analyst Jamie Baker says the timing of the storm may actually be a positive for Delta in the longer term. Baker says because the storm hit after the holiday season, most lost revenue was from business travelers who are more likely to reschedule flights
“The majority of corporate revenue related to cancellations will now simply be flown later in the quarter,” Baker said on CNBC. “The reality is that, with the stock market strong and with temperatures plummeting, consumers are likely to spend more, not less, on the upcoming spring break.”
In November, Baker said Delta will likely beat all major U.S. airlines in unit revenue growth in 2018.
Shareholders will also be watching for updates on Delta’s recently announced $60 fee for checked bags on international flights. The new policy started in early December. The Department of Transportation estimates…
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