Delta Air Lines (NYSE: $DAL) released its third-quarter earnings on Thursday before markets opened. The stock tumbled after the earnings report as the airline missed estimates.
Delta Air Lines Misses Third Quarter Estimates
Delta Air Lines reported adjusted earnings per share of $1.50 for the third quarter, below expectations of $1.52. Its Q3 revenue was $14.59 billion, missing estimates of $14.67 billion.
According to the report, the Juley CrowdStrike event had a 45-cent impact on their adjusted earnings, which slightly misses estimates. The airline struggled to recover from the event, which took out thousands of machines using Microsoft Windows and forced the company to cancel thousands of flights. According to the report, it cost the airline $380 million in revenue.
Fourth Quarter Outlook Misses Estimates
For the fourth quarter, Delta Air Lines expects earnings growth driven by resilient travel demand and strong demand for year-end holiday travel. The company expects a fourth-quarter adjusted EPS of $1.60 to $1.85, above estimates of $1.71 at the midpoint.
Delta expects revenue to rise 2% to 4% year over year, below estimates of a 4.1% increase at the midpoints. The company is expecting a 1-point hit to revenue due to sluggish demand before and after the US elections slated for November 5, 2024.
Delta Air Lines Market Performance
As of close of trading on October 9, 2024, Delta Air Lines (DAL) shares were trading for $50.98, a 0.71% increase over the previous day, and 26.72% increase year to date. Over the past 12 months, the stock was up 37.78%.
Following the disappointing third-quarter results, the stock fell 1.24% in pre-market trading to $50.20 per share.
Despite the tumble, analysts remain bullish about DAL shares, giving them a strong buy consensus rating. They forecast a wide range of price targets, with a high of $85 and a low of $52. Their average price target is $61.69, which is a 21.01% potential upside based on the most recent closing price. Following the Q3 results, analysts are expected to revise their estimates.
How Hurricane Milton Is Impacting Delta
According to data from FlightAware, over 2,200 flights in the US have been canceled. Delta Air Lines and other airlines have waived all fees for travelers seeking to change their tickets. Delta has capped all fees for those seeking to travel out of the path of Hurricane Milton.
Are DAL Shares Undervalued?
Despite rising over 26% in 2024, Delta Air Lines has experienced massive volatility in the third quarter. For instance, the stock took a dive following the CrowdStrike incident and the report that it missed out on $380 million in revenue. Additionally, the volatility in oil prices has led to the stock’s volatility for a good portion of this year.
In terms of valuation, DAL shares trade for 7.11x their forward earnings and have a price-to-earnings growth (PEG) ratio of 0.94. That is quite cheap and is a 49.7% discount to the industrial sector overall.
Should You Add Delta Air Lines (DAL) To Your Portfolio?
Delta Air Lines is the world’s biggest airline in terms of revenue, fleet size, asset value, and market cap. As such, it has a bigger moat when dealing with shocks to the airline industry. DAL shares have outperformed the market this year, with analysts forecasting the trend will hold for the next 12 months. As such, adding DAL shares to your portfolio could potentially pay off in the medium term.
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