Thursday, January 14, 2021

Delta Air Lines to Kick Off US Airlines Reporting

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News shaping
the markets today

     

What’s happening: Delta Air Lines is scheduled to report its earnings results for the fourth quarter before the opening bell on Thursday, January 14.

What happened: The airline industry remains under significant pressure due to rising infections, despite economies gradually reopening after the covid-19 outbreak.

With Delta Air Lines scheduled to kick off the earnings season for US airlines today, investors will closely monitor the results for any signs of a turnaround.

What are the estimates: Markets are expecting the company to record a fourth straight quarter of revenue decline and adjusted losses.

  • Revenues are projected to decline to $3.8 billion, from $11.4 billion in the same quarter last year.
  • Delta is expected to report an adjusted loss of $2.29 per share, versus a year-ago profit of $1.70 per share.

Why it matters: With various countries continuing to impose restrictions and quarantine rules to manage the pandemic, air travel has suffered a drastic setback. This forced Delta Air Lines to park about 40% of its aircraft fleet by September 2020. In October, management warned that it may take another two years for the company to return to pre-pandemic revenue levels.

Despite the challenging backdrop, no major airline company in the US announced the filing of bankruptcy last year. Airlines have taken several initiatives to lower costs and are receiving massive aid from the government.

Although a decline in covid-19 cases late summer gave hopes of an earlier return to normalcy, the US has since then witnessed a resurgence of infections. The country recorded an average of more than 200,000 cases per day in early December, up sharply from around 35,000 cases a day just three months back.

Despite the sharp rise in numbers, people didn’t take a break from traveling for the holiday season. The Transportation Security Administration (TSA) screened an average of over 1 million passengers per day in the final two weeks of last year. Although the number was still almost half of last year’s traffic, it represented a spike from the figures recorded in April, when passengers travelling had plummeted by more than 95% year on year.

One of the major key metrics that markets will focus on is the company’s load factor, or the percentage of seating capacity used by passengers. While Delta Air Lines’ load factor is expected to have declined on a year-over-year basis in the fourth quarter, the figure may represent an improvement versus the third quarter.

How shares performed so far: Shares of Delta Air Lines have been declining since the coronavirus outbreak in the US and failed to make any meaningful rebound. The stock has performed much weaker than the broader market, losing around 32% over the past twelve months versus a rise of about 16% in the S&P 500.

What to watch: Investors will keep an eye on the company’s load factor and are hopeful of some rebound in this. With the ramp up in the covid-19 vaccine rollout, the airlines industry is hopeful of a quicker recovery in business.

The Markets Today

     

US stocks will be in focus today ahead of a basket of economic reports from the country.

Context: US stocks recorded modest gains on Wednesday, amid a House vote on the impeachment of outgoing President Donald Trump.

Details: Markets were cautious ahead of the House of Representative’s vote to impeach Trump for the second time. A majority of US lawmakers voted in favour of impeaching Trump and charging him with "incitement of insurrection" following the attack on the Capitol by his supporters last week.

Stocks remained supported by hopes of additional fiscal aid when Joe Biden begins his presidency on January 20 and Federal Reserve’s assurances of continued support for the economy.

Meanwhile, the US continued to report high daily covid-19 numbers, adding around 229,603 cases on Tuesday. The country also recorded approximately 4,402 deaths, the highest one-day number since the start of the pandemic.

Investor sentiment was lifted by a rise in the annual inflation rate to 1.4% in December, from 1.2% in November. There were concerns, however, around a widening of the US budget deficit to $144 billion in December.

The Nasdaq 100 added 0.63% to close at 12,973.63, while the S&P 500 rose 0.2% to end the trading day at 3,809.84 on Wednesday. The Dow Jones index bucked the trend, shedding 8.22 points to settle at 31,060.47. Despite the downturn, the index is merely 0.1% off its record closing last Friday.

What to watch: Markets await data on initial jobless claims, imports and exports from the US. The number of people filing for jobless benefits is likely to decline slightly to 780,000 last week, from 787,000 in the week ended January 2. Export prices are projected to rise 0.5% in December, while import prices are expected to increase 0.6%.

The rising covid-19 cases remain a major concern for investors, with total cases exceeding 23 million in the US.

Other Markets: European trading indices closed mostly higher on Wednesday, with the German DAX 30 and French 40 up by 0.11% and 0.21%, respectively. However, the FTSE 100 traded down 0.13%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

India's wholesale prices, Saudi Arabia’s inflation rate, Germany’s government budget and gross domestic product, South Africa's SACCI business confidence index, Russia's vehicle sales, Turkey’s foreign exchange reserves, China’s foreign direct investment, Argentina’s inflation rate as well as the US EIA’s natural gas stocks.