S&P 500 constituent Delta Air Lines, Inc. (NYSE:DAL) reports earnings Thursday morning. But in front of the release, are investors bracing for blue skies or a crash landing Delta stock?
Let’s take a look at Delta stock’s recent quarterly announcements, the DAL chart and what, if anything, the options market are estimating in front of the earnings report.
Delta Stock Earnings Picture
In front of Thursday morning’s second-quarter earnings release, 14 analysts are forecasting profits of $1.48 per share of Delta stock. Views range from $1.35 to $1.92.
The current consensus estimate compares to last year’s, same quarter result of $1.27 and represents an increase of nearly 41%. Full-year profit views are for DAL to earn $6.02 in 2016 and grow profits by about 31%.
On the sales side, Delta stock’s revenues are expected to slip narrowly to $10.6 billion versus 2015’s Q2 result of $10.7 billion. Sequentially, sales are forecast to increase by 14% from Q1’s $9.3 billion.
Full-year sales forecasts for Delta are pegged at $40.4 billion and mostly flat versus 2015’s $40.7 billion. Looking further out, Delta stock is expected to see sales rise 3% in 2017 to $41.7 billion.
DAL Stock Short-Term Trading Record
Delta stock has established a strong pattern of beating Street profit views 91% of the time on 11 occasions and missing just once over the last couple years.
In the immediate aftermath of reporting, investor reaction in Delta stock has proven to be equally impressive with DAL rising six consecutive quarters in a row.
Working backwards, DAL has moved 0.94%, 3.29%, 1.81%, 0.76%, 2.60% and 7.27% over the past several quarters. The overall investor reaction in Delta stock has produced an average gain of 2.78% and variability of 2.40% based on a one standard deviation reading.
DAL’s seven-day stock performance has resulted in gains in five of the last six quarters with an even stronger mean return of 3.76%, but slightly bumpier one standard deviation of 3.87%.
Delta Stock Weekly Chart
A long-standing and broken uptrend line and lower highs may have a few bears eyeing Delta stock for lower prices. Nevertheless, the overall body of technical evidence supports the bull case.
At this time, Delta stock has put in a decent-sized 38%-plus correction in 2016. The decline has concluded with a hammer candlestick, double-bottom test of last year’s flash crash low, as well as the 200-week simple moving average.
Lastly, an oversold stochastic crossover acts as further confirmation for traders looking at Delta stock as a name that’s ready to, technically speaking, take-off.
Delta Options Pricing
In late trade on Monday, the at-the-money DAL July $38.50 call is the most heavily-traded option by a wide margin.
Contract volume of over 31,000 compares to open interest of just over 2,200 and suggests investors are readying for Thursday’s Delta stock earnings report with opening long call positions.
Pricing by options traders point to a 68% chance Delta stock will remain within a range of around $36 to $40.45 through Friday’s expiration.
The math behind the DAL price range calculation is based on the at-the-money July straddle markets, which are trading on implied volatility of 55% with four trading sessions left.
The July contract is the purest play on the earnings event and tells us what traders collectively expect from Delta stock in the immediate aftermath of its quarterly announcement.
The expected dollar move up or down works out to about 5.8% by Friday’s close. That’s modestly above DAL’s recent post-earnings, close-to-close reactions, but within the scope of the multiday bullish trend while having two days to make good on that promise.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
