Will Delta Earnings Fly Higher Than Those of United Continental and American?

Delta Air Lines has seen huge gains in recent years, but its rivals have also made big moves lately. Find out what's next for Delta earnings.

Jan 17, 2014 at 1:31PM

Investors have sent shares of Delta Air Lines (NYSE:DAL) sky-high over the past year, as the stock price has more than doubled since last April. But as strong as the company has become, the competitive threat from long-established rival United Continental (NYSE:UAL), as well as newly merged American Airlines Group (NASDAQ:AAL), continues to pose a long-term challenge to Delta's earnings dominance.

The entire airline industry has recovered strongly from the financial crisis, with just about every carrier participating in the profitability gains resulting from higher fares, greater utilization rates, and the implementation of lucrative ancillary fees. But Delta has done an extremely good job of outpacing United Continental, as well as American and US Airways, on key industry benchmarks, and that has led to greater investor excitement about Delta's prospects.

Can the company keep up its winning ways in light of the American-US Airways merger, or will new challenges prove too difficult for it to overcome? Let's take an early look at what's been happening with Delta Air Lines over the past quarter and what we're likely to see in its next quarterly report, which is due on Tuesday.


Stats on Delta Air Lines

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$9.03 billion

Change From Year-Ago Revenue


Earnings Beats in Past Four Quarters


Source: Yahoo! Finance

How are Delta's earnings soaring so much?
Analysts have had mixed views on Delta's earnings in recent months. They've boosted their fourth-quarter estimates by 10%, but they've cut their full-year 2014 projections by more than 12%. The stock hasn't faltered, however, climbing another 31% just since mid-October.

Delta's third-quarter earnings showed the continued strength that the carrier has had lately. Revenue jumped 6%, leading to a 29% gain in earnings per share. A combination of cost-cutting efforts, lower fuel costs, and growth in its domestic demand helped push earnings up, outweighing falling performance in its Pacific segment.

A big part of Delta's dominance has come from superior performance in several key areas. Delta's net income dwarfs those of its rivals, with its strong profit margins allowing it to take greater advantage of revenue falling to its bottom line. In addition, the key corporate-traveler segment rates Delta well above American, United, and Southwest Airlines (NYSE:LUV), giving the company command of a group of customers that traditionally is much more profitable for an airline than the typical recreational flyer. Because of its strong profits, Delta has been able to eliminate debt and get itself in better position to deal with competitive challenges of the future.

Still, Delta isn't giving up on economy-class customers. Indeed, unlike United and American, Delta has ramped up the size of its economy sections, having smaller business-class and premium-economy areas in order to get more customers on board its planes. For Delta to do so without sacrificing its reputation among business travelers is a testament to its operational strength.

Moreover, Delta is working hard to press its advantage. The company has attacked Alaska Air in the Seattle market, having expanded service there four times between October and December in an effort to build a stronger gateway to the Pacific region.

In the Delta earnings report, watch to see whether the company is able to build on the strong news it released earlier this month, saying passenger unit revenue rose 10% from good timing of the Thanksgiving holiday and strong demand among travelers. As long as those favorable conditions persist, Delta should be able to keep using its operational excellence to fly over the competition.

Save on all your transportation needs
Air travel is expensive, but the odds are good that you probably spent thousands of dollars more than you should have on your car or truck. In fact, the auto industry can be such a dangerous place for consumers that our top auto experts are determined to even the playing field. That's why they created a a brand new free report on "The Car Buying Secrets You Must Know." The advice inside could save you thousands of dollars on your next car, so be sure to read this report while it lasts. Your conscience, and your wallet, will thank you. Click here now for instant access.

Click here to add Delta Air Lines to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information