Delta Air Lines Expected to Highlight Higher Earnings Amid Premium Client Focus

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Delta Air Lines may highlight the higher end of its full-year earnings guidance this week, as its mix of premium clients could help mitigate domestic revenue challenges caused by lower-end consumer spending, according to a note from BofA Securities on Tuesday.

The airline is poised to set the tone for the upcoming earnings season when it announces its second-quarter results and provides third-quarter guidance on Thursday. Delta’s shares have slipped 12% since peaking in mid-May, reflecting apprehensions about domestic capacity, promotional activity, and recent negative guidance revisions from competitors American Airlines and Southwest Airlines, noted BofA analyst Andrew Didora.

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Although Delta isn’t immune to industry pressures, Didora suggested that the airline’s focus on premium, corporate, and international segments should help it navigate these challenges better than its peers. BofA reaffirmed its buy rating and set a price target of $55 for Delta’s stock. By midday, Delta’s shares had risen 1.8%.

The brokerage has adjusted its second-quarter earnings per share (EPS) target to $2.41, up from $2.25, and higher than Wall Street’s $2.37 forecast. This adjustment is primarily driven by lower fuel costs, despite BofA’s revenue growth forecast of 5.6%, which falls on the lower end of Delta’s guidance.

BofA expects Delta to maintain its 2024 EPS guidance range of $6 to $7, with an inclination toward the higher end, given the resilience of its premium and corporate segments compared to lower-end consumers. Consequently, the brokerage lowered its 2024 EPS estimate slightly to $6.67 from $6.81, still above the consensus estimate of $6.61.

For the third quarter, BofA revised its EPS estimate to $2.10, down from $2.13, yet remaining above the Visible Alpha consensus of $2.07, based on total revenue growth of 5.2%.