Delta Air Lines (NYSE:DAL) really deserves a round of applause after knocking it out of the park with a quarterly beat-and-raise. I am bullish on DAL stock, and if the market doesn’t appreciate Delta’s remarkable progress yet, this gives opportunistic investors a chance to get on board before the plane leaves the runway.
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Delta Air Lines is one of the major airline carriers in the U.S. and internationally. Of course, Delta’s business was in serious trouble during the COVID-19 pandemic. That’s why the company’s just-released quarterly results were so important; investors wanted to know whether there’s actually a travel recovery in progress in 2023.
As we’ll discover, the results were excellent, and the future looks bright for Delta Air Lines and for the travel industry in general. So, even if DAL stock isn’t soaring, that doesn’t mean Delta will crash and burn anytime soon.
Delta Air Lines Breaks Records and Beats Estimates
Delta Air Lines’ June-quarter 2023 results provide compelling evidence that there is, indeed, a travel rebound in progress. Thus, Delta’s President cited the “strength of the demand environment,” among other factors, when he reported that the company “delivered record revenue in the June quarter, with total revenues 19 percent higher than the June quarter of 2022.”
In dollar terms, Delta Air Lines’ quarterly adjusted operating revenue totaled $14.6 billion, surpassing the consensus estimate of $14.4 billion. This wasn’t the company’s only record-beating quarterly result, as Delta also reported record operating income of $2.5 billion.
Let’s drill down further on Delta Air Lines’ earnings. Analysts had expected Delta to report EPS of $2.40 for the June quarter, but the company actually delivered EPS of $2.84 for a convincing beat. Interestingly, investment banking firm Jefferies raised its DAL stock price target from $50 to $60 and reiterated its Buy rating on the shares a couple of days before Delta’s quarterly earnings release. Jefferies’ crystal ball must be in good working order, as Delta’s results suggest that a share-price rally may be imminent. Furthermore, a Barron’s writer picked DAL, among a few other airline stocks, as one to buy as Americans act upon their pent-up, post-pandemic urge to travel.
Along with all of that, Delta Air Lines’ management provided a bright outlook. Delta CEO Ed Bastian proclaimed, “Consumer demand for air travel remains robust.” Hence, he announced that Delta is raising its “2023 earnings guidance to $6 to $7 per share” from the previous forecast of $5 to $6 per share and “reiterating our recently updated outlook for $3 billion of free cash flow.”
Why Isn’t DAL Stock Flying High?
In light of these outstanding results, Bastian earned the right to indulge in some optimistic musing. The CEO expects to see a “very, very strong Q3, as indicated by our guidance, and I think we’ll have a strong Q4 as well.” Moreover, regarding the overall increase in travel demand, Bastian anticipates that it will “persist for quite some time.”
Delta Air Lines’ management is quite confident, and the carrier’s results speak for themselves. Consequently, DAL stock should be flying high right now – but then, the market doesn’t always do what we should expect it to do.
Remember how I previously mentioned the Jefferies analyst and the Barron’s writer who issued optimistic opinions about Delta before the airline’s earnings report? Clearly, some folks foresaw Delta Air Lines’ positive results prior to the release date. After all, if you’ve been to an airport recently, it’s practically impossible not to notice the crowds and the long lines.
Blame algorithms or AI or the advent of app-based trading if you’d like, but there’s no denying that the stock market is extremely efficient and forward-looking in the 2020s. This, I believe, explains why DAL stock barely moved today despite Delta Air Lines’ excellent quarterly results and optimistic outlook.
Is DAL Stock a Buy, According to Analysts?
Delta is well-liked among Wall Street’s prominent experts. According to TipRanks’ analyst rating consensus, DAL is a Strong Buy, based on 15 unanimous Buy ratings. The average Delta Air Lines price target is $59.11, implying 23.9% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell DAL stock, the most accurate analyst covering the stock (on a one-year timeframe) is Helane Becker of TD Cowen, with an average return of 20.4% per rating and a 77% success rate. Click on the image below to learn more.
Conclusion: Should You Consider DAL Stock?
Delta Air Lines served up a June-quarter beat-and-raise. What more could the market ask for? Yet, the Delta share price was stuck in neutral today.
That’s not a problem at all; it’s likely just an opportunity for investors with some dry powder (cash) handy. At the end of the day, it’s evident that travel is picking up, and Delta Air Lines is demonstrating remarkable results. Thus, I believe that right now is the perfect time to consider a long position in DAL stock.
