Delta Airlines (DAL) is set to report FQ2 earnings this Wednesday before the opening bell. The Estimize EPS consensus is set at $1.27, 5 cents above Wall Street’s expectations. In terms of revenue, the Estimize consensus is above the Wall Street consensus at $10.7B, making for an interesting delta. These numbers would put Delta’s year-over-year (YoY) earnings and revenue growth at 6% and 1% respectively.
As one of the major players in the airline industry, Delta has had to struggle with recent trends in the global economy. From the beginning of March to the end of June, the price of a barrel of oil rose nearly 20%, although it is still down from an all-time high in recent years. As of the first quarter of this year, fuel accounts for nearly 23% of the airline’s total costs, and this drastic change in oil prices could negatively affect Delta’s bottom line.
Recently, oil prices have taken a big hit due to talks in halting Iran’s nuclear program. As of this morning, a recent deal signed between the U.S. and five other world powers will halt the country’s development of nuclear weapons. In exchange for stopping Iran’s nuclear activities, the U.S., the European Union, and the United Nations will lift sanctions on the country that will allow it to possibly double its oil exports. A hike in the supply of oil will drastically curb prices downwards, a change desperately needed by Delta.
The company has consistently struggled amongst other transportation companies, returning an unimpressive -11.8% year-to-date, versus rival JetBlue (JBLU) at 40.79% and the Dow Jones Transportation Average (DJTA) at -9.40%.
The company has also had to battle with problems surrounding the stronger dollar in foreign countries. As published in Delta’s first quarter filings with the SEC in April of this year, approximately ⅓ of its revenue from passengers comes from outside of the United States. A stronger dollar would impact foreign customers’ ability to travel, resulting in a decrease in foreign revenue.