When Delta Air Lines (Delta stock) releases its results for the quarter that ended in September 2022, Wall Street anticipates a rise in profitability compared to the previous year on the back of more significant sales. Although this widely disseminated consensus expectation is critical for evaluating the company’s earnings picture, the degree to which the actual results compare to the predictions is a significant element that has the potential to influence the stock price shortly.
Suppose these critical data come in higher than anticipated in the earnings report that is scheduled to be issued on October 13, 2022. In that case, the stock price could be able to go higher as a result. On the other side, if they don’t meet their target, the stock price can go down.
Although the discussion of business circumstances by management on the results call will mostly decide the long-term viability of the recent price shift and future earnings forecasts, it is still beneficial to have a handicapping insight into the probabilities of a good EPS surprise.
The estimation of Zacks’s consensus
It is anticipated that this airline will announce quarterly earnings of $1.57 per share in its forthcoming report. This would increase +423.3% compared to the previous year’s results.
It is anticipated that total revenues will amount to $14.19 billion, representing a 55.1% increase over the same quarter a year earlier.
Estimated Changes Over Time Trend
The consensus estimate of earnings per share for the quarter has been revised 5.83% lower than its current level over the past 30 days. This is simply a reflection of how the covering analysts have collectively evaluated their initial projections throughout this period, and it is essential to note that this is the case.
Investors should remember that the direction of estimate revisions by each covering analyst may not always get reflected in the aggregate change. This is something they should keep in mind when making investment decisions.
A Whisper of Earnings
Before releasing a company’s earnings report, estimate revisions might provide insight into the state of the underlying business during the time period whose results are being reported. This understanding is the foundation for our in-house developed surprise prediction model, known as the Zacks Earnings ESP (Expected Surprise Prediction).
The Zacks Earnings ESP is a comparison between the Zacks Most Accurate Estimate and the Zacks Consensus Estimate for the quarter. The Zacks Most Accurate Estimate is a more current version of the Zacks Consensus EPS estimate. The reasoning for this is that analysts who revise their predictions just before the publication of results have access to the most recent information, which has the potential to be more accurate than what they and others who contributed to the consensus had projected previously.
As a result, an Earnings ESP value that is positive or negative shows, theoretically speaking, the expected departure of the actual earnings from the consensus estimate. On the other hand, the model’s predictive value is only significant for positive ESP readings.
When paired with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3, a positive Earnings ESP is a powerful indicator of an earnings beat. This is especially true when the Earnings ESP is combined with the Zacks Rank (Hold). According to the findings of our study, companies that have this combination result in a positive surprise over seventy percent of the time, and a strong Zacks Rank boosts the predictive value of Earnings ESP.
Please consider that a pessimistic Earnings ESP estimate does not always indicate that earnings will be missed. According to the findings of our study, it is difficult to forecast an earnings beat with any significant degree of certainty for firms that have negative Earnings ESP readings and/or a Zacks Rank of 4 (Sell) or 5. (Strong Sell).
How Does Delta Stock Stack Up When Considered Together?
Since the Most Accurate Estimate for Delta (NYSE:DAL) is lower than the Zacks Consensus Estimate, this would imply that analysts have lately developed a pessimistic outlook on the earnings prospects of the firm. As a consequence of this, the Earnings ESP came in at -2.50%.
On the other hand, the company’s stock has a Zacks Rank of #3 as of right now.
Due to this mix of factors, it is impossible to make an accurate prediction on whether or not Delta stock (NYSE:DAL) will end up beating the consensus EPS forecast.
Does Past Performance of Earnings Surprise Offer Any Clues?
When making projections for a firm’s expected earnings in the future, analysts frequently take into account the degree to which the company has been able to meet or exceed previous consensus predictions. Therefore, it is worthwhile to have a look at the history of the surprise in order to determine the extent to which it will impact the following number.
In the most recent quarter that was reported, it was anticipated that Delta (NYSE:DAL) would report earnings of $1.71 per share; instead, Delta Air Lines only recorded earnings of $1.44 per share, which was a surprise of -15.79%.
The firm has been successful in beating the consensus EPS forecasts three times over the course of the previous four quarters.
It’s possible that a company’s earnings will not be the only factor in determining whether a stock will rise or fall. Even when the company’s earnings were better than expected, many companies’ stock price goes down because of other variables that dissatisfy investors. Similarly, unanticipated catalysts contribute to the growth of a number of equities, even when earnings forecasts are missed.
Increasing one’s prospects of success by betting on stocks that are anticipated to have higher than projected earnings. Because of this, it is essential to verify a firm’s Zacks Rank and Earnings ESP before it releases its quarterly earnings. Make sure to make use of our Earnings ESP Filter so that you can find the finest stocks to buy or sell before they have declared their earnings.
It does not appear that Delta (NYSE:DAL) is a solid possibility for outperforming profit expectations. However, investors need also to pay attention to other considerations before making any bets on this stock or deciding whether or not to avoid it before the company reports its earnings.
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