Delta Air Lines (NYSE:DAL), one of America’s biggest air carriers, is scheduled to report its second quarter Fiscal 2023 earnings on July 13, before the market opens. The Street expects Delta to post diluted earnings of $2.37 per share, showing a 64.5% jump over the Q2FY22 figure. Similarly, sales estimates are pegged at $14.39 billion, representing a smaller 4% increase over the same period last year. Further, the Q2 expectations show a significant improvement over the Q1 figures as airlines picked up momentum in the quarter, benefitting from pent-up demand despite the tough macro environment.
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Delta Sees a Promising Road Ahead
Turning to the company’s own forecasts, ahead of its investor day in June, Delta renewed the outlook for Fiscal 2023 by raising expectations for both operating margin and earnings per share (EPS). Meanwhile, for Q2, Delta expects sales to grow between 17% and 18%, and EPS is expected between $2.25 and $2.50. The company even resumed paying quarterly dividends that were paused in March 2020 due to the pandemic. The first dividend of $0.10 per share will be paid on August 7. This means Delta is expecting to see improved finances going forward.
According to industry statistics, the global airline industry has reached its pre-pandemic level. The TSA (Transportation Security Administration) noted that a record number of passengers passed through checkpoints during the recent July 4 holiday period. Air carriers are poised to experience robust demand momentum going forward. The same optimism is built into analysts’ projections.
One of the major tailwinds for air carriers is that jet fuel prices have been on a steady decline this year, which will boost their margins. Having said that, salaries and wages remain at elevated levels as airlines continue to face staffing shortages. Despite this, the heavy demand for daily flights and a resurgence in passenger numbers are helping air carriers continue charging a premium to customers, thereby alleviating the burden of increased costs.
What is the Future of DAL?
Delta’s revised outlook was cherished by investors, pushing the shares higher by 12.8% since the day. Plus, analysts increased the price target on DAL stock, citing stronger-than-expected sales figures and an overall pick-up in demand from the ongoing holiday season. Analysts are also bullish about Delta’s focus on debt reduction and free cash flow generation.
Yesterday, Jefferies analyst Sheila Kahyaoglu raised the price target on DAL stock to $60 (23.3% upside) from $50 while maintaining a Buy rating. In a pre-earnings note, Kahyaoglu stated that Delta stock is the firm’s top pick based on its strong pricing power, de-risking efforts, and sustainable free cash flow generation capabilities for the long run.
All the other 14 analysts who recently rated DAL agree with Kahyaoglu’s views and have awarded Delta Air Lines stock a Strong Buy consensus rating. On TipRanks, the average Delta Air Lines price target of $58.57 implies 20.4% upside potential from current levels. Year-to-date, DAL stock is up 49.2%.
Ending Thoughts
Delta Air Lines continues to gain solid traction from the resurgence in travel demand. The company is making the right efforts to boost its balance sheet strength, generate cash flows, and reward shareholders through dividend payments. Analysts, too, remain bullish about DAL and foresee a promising way forward.
