Covid and then war, can we stay positive?
Delta Air Lines (DAL) will publish its first earnings report for 2022 on Wednesday, April 13, before the market opens. The report will cover the first fiscal quarter ending March 2022.
For an Atlanta-based transportation company, we have different estimates from different financial institutes and research companies. Earnings per Share (EPS) estimates at $1.27 (Seeking Alpha), $1.33 (Zacks), and $1.36 (NASDAQ) with $8.78 Revenue on average. For the full year 2022, EPS expectation is $1.36 by NASDAQ and $1.72 by Seeking Alpha. In the same quarter, last year company reported a $3.55 loss per share on $3.91 billion in revenue. 2022 total revenue is estimated at $43.63 billion, which can bring a 46% increase year over year.
While we are getting ready for the report, should not forget that fast fuel price raise cannot help us much to feel good. However, still, there are some hopes, because it will be the first quarterly report, that most of the Covid-19 restrictions have been removed. On the other hand, the last month of the period included in the report was associated with the war in Ukraine increased rapidly the oil price, and fixed costs for Airlines. Therefore, in this report, it will be very important to see the percentage of capacity utilization. The percentage of capacity utilization or "load factor" of DAL before Corona outbreak restrictions was above 85%. After the Corona outbreak, it fell sharply to 34.2% in Q2 FY 2020 and then slowly recovered to 78.1% in Q4 FY 2021. Any number above 80%, can be accepted as a positive report, and help the share prices to increase, as the fixed costs will be divided among more clients and lift the net income to increase.
Amid a recovery of travel demand after the COVID-19 restrictions, overall we can be positive. On the other hand, introducing a 4% pay increase with higher fuel prices can directly affect the company's net income. Now we have to wait and see what will be the final result of the calculation. Can the increased prices overcome the inflation and cover the costs or not, because the company has $24.5 billion in debt and increasing rates and Yields mean a higher payment.
From the technical point of view, the recently observed uptrend has been violated, however, it did not change to the downtrend as well. As long as the share price moves above $37, we can count on bulls in the chart. First resistance sits at $40 and breathing above this level will encourage the bulls to go forward. On the flip side, a negative report and breaching under $37, can open the doors for lower levels with $34 and $30 as the next targets.
