Delta Air Lines, Inc. (NYSE:DAL) Option Calls Provides 205% Potential Profit!
And More To Come!
by Ian Harvey
January 12, 2018
GETTING OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
Delta Air Lines, Inc. (NYSE:DAL)
Here is an update of Delta Air Lines’ winning options call trade after reporting earnings. This options trade was recommended, to “Cut-To-The-Chase” Members of Stock Options Made Easy, on Wednesday, January 10, 2018 -- in the article ““Cut-to-the-Chase” Recommendations - Week Beginning Monday, January 08, 2018”; which produced excellent potential profits of 205% within 24 hours of executing the trade!
Airline stocks are
likely to report better-than-expected earnings per share in the fourth quarter
sentiment pertaining to airlines is quite positive ahead of the earnings
season. This is because airline stocks seem to be back in favor after
struggling for most of 2017 due to multiple headwinds like the back-to-back
hurricanes and unit revenue issues, among others.
The fourth-quarter earnings season will
be kicked off by Delta Air Lines, Inc.
The GOP's tax-cut package, ticket prices
and, naturally, those targets seem likely to be focal points for investors. On
Tuesday, Bank of America Merrill Lynch said the tax cuts are likely to boost
business travel, helping Delta, United Airlines (UAL) and American Airlines
As for Q4 itself, Wall Street expects
Delta to report earnings per share of 90 cents, up 10%, on revenue of $10.16
billion, a 7% increase. That top-line gain would mark the biggest increase
since Q3 2014. The Earnings Whisper number is $0.95 per share.
Delta last week said it expected a
roughly 4% increase in passenger unit revenue during the quarter, which would
be its best showing all year in the key metric. The company expects adjusted
operating margin of around 11%.
After United flat-out terrified investors
in October following a murky 2018 financial forecast and shares of American and
others retreated on a mixture of worries about too much expansion and rising
costs, Delta has remained "the go-to
legacy airline," Morgan Stanley analyst Rajeev Lalwani said in a
research note last week.
He cited the carrier's 2018 profit and
the cost targets it outlined last month at its investor day — EPS of
$5.30-$5.70 and unit cost growth of flat to up 2% along with the potential lift
from the GOP's tax reform — as reasons to like the airline.
** OPTION TRADE: Buy the DAL FEB 16 2018 57.500 CALL at approximately $0.65.
Delta Air Lines Inc.'s earnings as well as revenues surpassed expectations.
The company's fourth-quarter earnings (excluding 16 cents from non-recurring items) of 96 cents per share beat the Consensus Estimate of 88 cents. Moreover, the bottom line expanded 17.1% on a year-over-year basis. Results were aided by higher revenues.
Operating revenues came in at $10,245 million, surpassing the Consensus Estimate of $10,158.8 million. The top line increased 8.3% from the year-ago figure. Strong demand for air travel during the holiday season aided revenues.
Delta Air Lines' unit revenue growth accelerated sharply, with airline revenue per available seat mile (RASM) up 4.4% year over year. This compared to a 2.7% increase in airline RASM in Q3 and a 1.7% gain for the first nine months of 2017 as a whole. As a result, revenue rose 8.3% to $10.25 billion last quarter.
This uptick in RASM growth allowed Delta to post a solid profit despite facing significant cost headwinds.
Also, Delta will reap quite a bit of savings from corporate tax reform. The company projects that its book tax rate will fall to roughly 22%-24% this year, from around 35% recently. As a result, Delta's quarterly EPS guidance of $0.60-$0.80 is roughly in line with its Q1 2017 adjusted EPS of $0.77.
On a full-year basis, Delta Air Lines has significantly more ambitious goals. Nonfuel unit cost growth is expected to decrease sharply after the first quarter (due to the timing of expenses and an ongoing cost-cutting program). That should help Delta stabilize its pre-tax margin.
For the first quarter of 2018, Delta expects operating margin in the range of 6% to 8%. Fuel price, including taxes and refinery impact, is expected between $2.05 and $2.10 per gallon in the same period. System capacity is anticipated to be up approximately 3% on a year-over-year basis.
The company expects total unit revenues (excluding refinery sales) to increase in the band of 2.5% to 4.5% (on a year-over-year basis) in the quarter. Also, non-fuel consolidated unit cost (normalized), including profit sharing, is expected to increase in the band of 2% to 4%.
Delta expects revenues in 2018 to increase between 4% and 6% on a year-over-year basis. The new tax law, which will reduce its corporate tax rate significantly, is expected to aid the company's performance.
Consequently, Delta lifted its earnings per share guidance for 2018. The company now expects earnings per share in the range of $6.35 to $6.70 (previous outlook: $5.35 to $5.70). The Zacks Consensus Estimate for 2018 earnings is pegged at $5.62 per share.
The upbeat views and the fourth-quarter outperformance pleased investors. As a result, Delta stock gained in early trading.
Delta Air Lines stock closed up 4.9% on Thursday after reporting fourth-quarter earnings that beat analyst estimates.
At the time of the recommendation the stock was trading at $54.20.
On Thursday the stock traded in a range of $56.26 to $59.20; ending the day at $58.52, up 4.76%. And after-market trading saw the stock climb another 0.87% to settle at $59.03.
So, for those traders who managed to execute this trade recommended by Stock Options Made Easy; a nice tidy potential profit of 205% within a 24 hour period.
ACTION TO TAKE…….
"YOU NEED TO BE IN IT TO WIN IT!"
Now is the time to decide if it is worth continuing to hold this trade or exit on excellent profits. It is nearly always prudent to exit a trade before an unknown incident occurs that could rattle a sound profit, and this is a fine example of such a situation.
As you would have by now realized, many of our trades are based on earnings predictions. This is not to say all trades recommended to members follow this pattern, but during earnings season this strategy has been very profitable.
Our approach is to predict whether a company will beat or miss estimates, whether the stock will appreciate or depreciate as a result and what strategies investors and traders can use. This type of prediction is based on thorough investigation and fundamentally based research, and the results have been very exceptional.Our proven track record says it all!!
Members of Stock Options Made Easy are provided with an extensive reason as to which direction a stock will move after earnings, followed up by a recommended options trade.
What To Do Now…….
If you interested in being part of this profitable action just click here……