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Delta Air Lines Inc. (DAL) - Get Delta Air Lines, Inc. Report beat third-quarter earnings estimates despite a loss of $120 million from Hurricane Irma, and said it expects margin and unit revenue gains in the fourth quarter.

In premarket trading on Wednesday, Oct. 11, Delta shares were up 1.9%.

During the quarter, passenger unit revenue rose 1.9% on a 1.6% capacity increase.

Delta reported positive unit revenue in three regions, led by a 5.9% gain in Latin America and a 2.4% gain in the Atlantic. Domestic unit revenue gained 1.5%. However, Pacific unit revenue fell 3.1%.

"Three of four entities reported positive unit revenues, and we see continued opportunity in business yields," said President Glen Hauenstein in a prepared statement. "We expect fourth-quarter unit revenues to be up 2% to 4% with all entities in positive territory by year end."

For the December quarter, Delta expects continued pressure on margins as unit revenue momentum catches up to the rise in fuel prices that began in July. The carrier forecast fourth-quarter margin between 11% and 13%.

In a morning note, Deutsche Bank analyst Mike Linenberg said the unit revenue guidance is better than expectations, but margin guidance is below expectations.

"Turning to the Dec Q 2017 outlook, Delta sees PRASM up 2.0% to 4.0% which is better than investors' expectations," Linenberg wrote. "Our specialist sales buy-side survey indicated expectations were for a range of flat to up 2%.

"Overall, the company sees an 11%-13% operating margin, which compares to our 14.6% operating margin forecast," he said. "Our EPS estimate of $1.19 is above the consensus of $1.13 which we estimate is driven by a 14% operating margin."

Buckingham Research analyst Dan McKenzie maintained a buy rating and a $65 target price.

"What caught our eye: a 1.6% improvement in domestic mainline PRASM on a 4.5% increase in capacity which suggests the premium seating initiatives and basic economy are beginning to drive better results," McKenzie wrote in a note.

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"The weak spot was the Pacific (PRASM -3.1% YoY) and we're comfortable that gets fixed in 4Q17," He said. "Looking ahead, the Street should like DAL's solid outlook."

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During the quarter, Delta earned $1.18 billion, or $1.64 a share. Adjusted net income was $1.1 billion, or $1.57 a share. Analysts had estimated $1.53.

Pretax income was $1.7 billion, down $182 million from the same quarter a year earlier. Operational disruption following Hurricane Irma, which impacted the Caribbean, Florida and Atlanta, resulted in a $120 million reduction in pretax income.

Revenue rose 5.5% to $11.1 billion, despite a $140 million revenue reduction from Irma. Analysts had estimated $11.03 billion. Cargo revenue increased 11.5%,  driven by higher volumes in freight and mail.

"We faced a number of challenges this quarter, including multiple hurricanes and an earthquake in Mexico," said CEO Ed Bastian in a prepared statement.

"Having just completed the busiest summer travel season in our history, we have good momentum, a determined team and a solid pipeline of initiatives to grow earnings and margins," Bastian said.

On the cost side, cost per available seat mile excluding fuel rose 4.8%, reflecting Irma-related cancellations. Excluding Irma's impact and fuel, CASM rose 2.6% driven by employee wage increases, product investments and accelerated depreciation associated with Delta's fleet initiatives.

For the full year, the carrier expects a 4% increase CASM excluding fuel. But it is targeting a 2% CASM increase in 2018 and beyond.

Story was updated at 8:14 a.m. with analyst comments.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.