Delta Airlines DAL kicked off the second quarter 2023 earnings season for the airline industry on July 13. The Atlanta-based carrier reported better-than-expected earnings per share and revenue, thanks to a buoyant air travel demand scenario. Low fuel costs also contributed to the results.
In addition, the company raised its earnings per share forecast for the current year. Delta now expects earnings for 2023 (on an adjusted basis) in the range of $6 to $7 per share (previous view was $6 per share). Sustained demand for air travel has also contributed to the results of two other S&P 500 airlines which have so far reported second quarter 2023 figures.
The same favorable winds should help entities like South West Airlines LUV, Jet Blue Airways JBLU and Copa Holdings CPA posts better than expected earnings per share for the June quarter.
Let’s take a closer look at the factors likely to boost second-quarter results for industry players who have yet to report earnings.
With air travel demand rebounding strongly from pandemic lows, the results should be impressive. People are again resorting to air travel to resume their normal activities. High passenger volumes are expected to boost results for airlines that have yet to report. With the summer vacation period partially falling in the June quarter, passenger volumes likely saw an uptick.
It is well documented that the demand for air travel is particularly strong on the leisure front. What is more encouraging is that international demand is also rebounding nicely.
Lower fuel costs are another tailwind for the industry. Notably, the price of oil fell 6.6% during the April-June period. This bodes well for airline earnings growth. Indeed, fuel expenditure represents a significant entry cost for the aeronautical space.
Here’s how to choose the right stocks
Several airline stocks are expected to post profits in the coming weeks. Amidst this huge population, it is always difficult for investors to choose a winning basket of stocks likely to generate earnings above expectations.
While there is no foolproof way to choose outperformers, our proprietary methodology – the combination of a positive EPS on earnings and a Zacks #1 (Strong Buy), 2 (Buy) or 3 (Hold) ranking – helps identify stocks with a strong chance of offering a positive surprise when announcing their upcoming results. Our research shows that for stocks with this perfect combination of elements, the odds of beating earnings are as high as 70%.
The earnings ESP shows the percentage difference between the most accurate estimate and the Zacks consensus estimate. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
Our choices
South West Airlines is based in Dallas. LUV has a Gain ESP of +2.58% and a Zacks Rank of 3, currently. LUV is expected to release its second quarter 2023 results on July 27.
Sustained passenger revenue is expected to contribute to Southwest Airlines’ results in the quarter ahead. We forecast a 3.2% increase in passenger revenue in the quarter ahead compared to actual figures for the second quarter of 2022. Low fuel costs are also likely to have helped LUV’s performance. Management expects economic fuel costs per gallon to be $2.55 in the June quarter, well below the $3.36 reported in the second quarter of 2022.
Southwest Airlines Co. award and EPS surprise
Southwest Airlines Co. price-eps-surprise | Quote from Southwest Airlines Co.
Jet Blue Airways has a Gain ESP of +12.50% and Zacks Rank #2. JBLU will release the results on August 1. You can see the full list of today’s Zacks #1 Rank stocks here.
Like LUV, upbeat demand for air travel and lower fuel costs are expected to have helped the Long Island City, NY-based low-cost carrier’s second-quarter performance. Management expects total revenues in the second quarter of 2023 to increase in the range of 4.5 to 8.5 percent from actual numbers in the second quarter of 2022. Average fuel cost per gallon in the June quarter is estimated by the company to be between $2.75 and $2.90. The midpoint of the guided range is well below the $4.24 per gallon reported by JBLU in the second quarter of 2022. We expect fuel cost per gallon in the reportable quarter to be $2.76.
JetBlue Airways Corporation award and EPS surprise
JetBlue Airways Corporation price-eps-surprise | Quote from JetBlue Airways Corporation
Copa Holdings currently has an ESP on earnings of +0.83% and a Zacks rank of No. 2. CPA will release its results on August 9. Like our other two picks, upbeat air travel demand and low fuel costs should have helped the Latin American carrier’s second-quarter performance. We forecast a 12.5% increase in passenger revenue in the quarter ahead compared to the actual figures for the second quarter of 2022.
Copa Holdings, SA Awards and EPS surprise
Copa Holdings, SA price-eps-surprise | Quote from Copa Holdings, SA
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