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Delta Air Lines share price: Q2 earnings on the horizon

Delta Air Lines [DAL] share price has experienced plenty of turbulence this year. Having gained altitude over the spring, the stock has experienced a steep descent as an abundance of headwinds give shareholders a bumpy ride.

Over the past three months, Delta Air Lines share price has dropped 19.11%, closing Friday 8 July at $29.72. Flight disruptions have been the root cause of the sell off, with the stock entering a steep descent since 27 May when it closed at $42.43. 

Delta Air Lines stock is now trading at around the same levels as September 2020, or, to put it another way, pandemic-era levels. The carrier was predicting a return to pre-pandemic levels of business in the second quarter, but will this week’s second quarter earnings bear that out.

Can Q2 earnings boost Delta Air Lines share price?

In the first quarter, Delta made an operating loss of $783m, well below the $1.02bn operating profit it made in the first quarter of 2019. The carrier reported an adjusted loss per share of $1.27, on revenue of $1.27bn. 

Business travel somewhat recovered in the quarter, with corporate sales in the US at 70% compared to the same period in 2019, while international corporate sales were around 50% of pre-pandemic levels.

For the second quarter, Delta had guided for capacity to be roughly 84% of 2019 levels. Total revenues were forecast at between 93% to 97% of 2019. 

Delta has since updated that guidance and expects revenues to be fully restored to pre-pandemic levels to come in at between $12.4bn an $12.5bn, below the consensus estimate of 13.34bn. 

Second quarter flight-capacity estimate is now forecast at between 82% and 83% of 2019 capacity, down from 84%. 

Hitting these revised numbers will determine which way Delta Air Lines share price goes post-earnings.

Watch out for impact of flight disruptions in earnings

Major flight disruptions have ripped through an industry still trying to recover from Covid. High demand and staff shortages have left flights cancelled, planes grounded and passengers well and truly put out during June. Delta CEO went as far as apologising for the disruption on LinkedIn and in an email to customers. Problems continued into the busy July 4 weekend as 12,000 flights were delayed as inclement weather added to the misery.

Investors should watch out both the impact of the June disruption and for any insight into how Delta thinks business will be affected during the  summer - traditionally one of the busiest periods for the sector.

Can Delta beat expectations?

For the second quarter, Delta is expected to post earnings of $1.64 a share, according to data from Yahoo Finance. Is a beat on the cards? Well, the airline has managed to beat analyst earning expectations for the past three quarters. In the first quarter, losses were $1.23 a share, beating the expected $1.27 loss per share. 

Analysts seem to think that there is upside left in Delta’s share price, even if some have been lowering their price targets. On Friday, Barclays analyst Brandon Oglenski lowered his price target to $45 from $60, keeping his ‘Overweight’ rating on the stock. Oglenski wrote in a note to investors that despite recession fears, Delta’s brand and product differentiation should deliver long-term value.  Evercore ISI analyst Duane Pfennigwerth lowered his target to $56 from $65. Both of  the lowered price targets would see a substantial upside on Friday’s close.

Of the 15 analysts polled by Refiniv, Delta’s share price has a median $54 target, suggesting a 81.7% upside.

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