Delta Air Lines will be the first airline to report Q1 results

Delta Air Lines will be the first airline to report first-quarter figures on Thursday Apr. 13 getting the sector’s earnings season off the ground.

The strength of demand over the crucial summer months will be key and investors will be looking for guidance on how bookings are holding up.

The carrier is set to release first quarter earnings before the open, and with its peers not reporting until later in the month, the results and guidance are likely to shape sentiment toward the sector over the days ahead.

Analysts expect Delta to report adjusted earnings per share (EPS) of 30 cents in the first three months of the year on sales of $11.97 billion, according to FactSet estimates. “Our adjusted EPS estimate is slightly below consensus, so a negative surprise could be in the cards,” Cowen analyst Helane Becker said in a note ahead of Delta’s earnings.

But attention is likely to be on airlines’ prospects for the second quarter and beyond. “We expect management to echo its comments from mid-March that demand for the second quarter and third quarter remains strong and that it is still able to offset higher costs through yields,” Becker added. She has an Outperform rating on the stock.

Analysts covering the stock also see positive second and third quarters for Delta, with EPS estimates suggesting double-digit increases on the same quarters in 2022. Current third quarter estimates have EPS 24% higher than the previous year.

After an impressive start to the year airline stocks have moved lower in the past month or so, as a number of factors, including the regional banking turmoil and higher oil prices, hurt sentiment. The NYSE Arca Global Airline Index rose more than 16% in the first three months of 2023 but has fallen 7.5% since then.

But the spring and summer months are historically good for airlines, and demand this year looks strong–United Airlines said last week that international bookings were up 15% in March compared with the year-ago period.

Earnings season is an opportunity for carriers to show investors whether a bumper summer travel period is around the corner. Any signs of weakening demand, and that economic conditions and elevated airfares are finally weighing on consumers’ desire to travel, could ensure the stocks remain grounded at current levels, or lower.

“It is important to contextualize the first quarter as it is historically the least important quarter for the airlines (13% of annual earnings pre-pandemic),” Melius Research analyst Conor Cunningham said. “Although results for the first quarter 2023 will be choppy, commentary on spring and summer travel is key to 2023,” he added.

Therefore second quarter forecasts, as well as full-year guidance, will likely pique the market’s interest. A number of other factors, including labor costs and pilot pay deals, as well as the impact of fuel prices will also be closely watched.

American Airlines (AAL) appeared to knock confidence in the sector Wednesday despite raising its profit guidance for the first quarter. The company’s new outlook for adjusted earnings per share of 1 cent to 5 cents fell short of analysts’ expectations. The carrier’s update didn’t include any forward guidance, which will be crucial in determining the path of airline stocks this earnings season. barrons.com