Are Low Earnings Expectations For Delta Air, Supervalu An Early Warning About Q4 Reports?

• Quarterly reports are few this week ahead of fourth-quarter reporting's kickoff.
• Results due from a leading food retailer and a national airline will be highlights.
• Do low analysts' expectations for these reports presage the earnings season to come?

In what may be the calm before the storm on the earnings front, a pair of seemingly unrelated companies are set to post their latest results. However, given that Wall Street analysts anticipate modest declines on the top and bottom lines for both Delta Air Lines, Inc. DAL and SUPERVALU INC. SVU, investors may be wondering if this is a sign of things to come.

Note that these results are for the period during which it was revealed that Warren Buffett had taken positions in Delta and other airlines, and the leading supermarket operator sold its Save-A-Lot business for $1.3 billion.

Delta

When Delta Air Lines shares its fourth-quarter results, the analysts — on average — predict that its earnings per share will have shrunk around 30 percent from a year ago to $0.82. But the $9.35 billion in expected revenue would be less than a 2 percent pull back. Note that this transportations company exceeded consensus EPS estimates by a nickel in the previous two quarters.

The forecast from 23 Estimize respondents is in the same ballpark, with EPS expected to come in at $0.83. That would be the lowest earnings result in the past six quarters. And the consensus revenue estimate for the three months that ended in December is $9.32 billion. Estimize overestimated on the top line in the previous quarter.

Supervalu

Wall Street's consensus forecast for Supervalu calls for EPS to have slipped from $0.16 in the same period of last year to $0.14. While the company has only topped analysts' EPS expectations in one of the past five quarters. The four Estimize respondents likewise have a consensus estimate of $0.16 per share in for the three months that ended in November.

Estimize overestimated revenue in the past few quarters, and this time, the respondents are looking for $4.08 billion, which is a bit more optimistic than the Wall Street consensus forecast for the fiscal third quarter of $3.93 billion. Either figure would be more than 4 percent lower than in the year-ago period, and the analysts so far see even a larger year-on-year decline in the current quarter.

Supervalu is scheduled to report its latest results before the opening bell on Wednesday, while Delta Air is expected to share its numbers the following morning.

Other Companies Ahead

Other companies anticipated to report declining earnings this week include KB Home and PNC Financial. But if the analysts are correct, earnings at Global Payments will be greater than a year ago, while those at Infosys will be the same.

The new earnings season really gets underway first thing on Friday, when the first of the big banks — Bank of America, JPMorgan and Wells Fargo — take their turns in the spotlight. Wall Street expects earnings growth from only two of these three.