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Why Did Delta Stock Rise Despite Q1 Loss
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Why Did Delta Stock Rise Despite Q1 Loss

Delta Air Lines (DAL) stock jumped more than 6.2% to close at $41.02 on Wednesday, after the company reported Q1 2022 results that investors generally liked despite continuing losses. Delta is an American global airline, flying passengers and cargo.

Although the airline industry is still dealing with COVID-19 pandemic economic shocks, Delta’s business is recovering. The company reported revenue that far exceeded Wall Street expectations. While it is still making losses, Delta posted a loss that was lower than what analysts’ expected.

Q1 Earnings Numbers at a Glance

The revenue of $9.35 billion surpassed the consensus estimate of $8.92 billion, despite being 11% below the pre-pandemic level for the same quarter in 2019. The adjusted loss per share of $1.23 was narrower than the expected $1.27 loss per share. The airline’s capacity recovered to 83% of its 2019 level. 

Delta ended the quarter with $12.8 billion in liquidity, which includes cash, short-term investments, and a revolving credit facility.

Q2 Outlook

With the Omicron variant faded, travel demand is rebounding and Delta is doing well at controlling costs. As a result, the company expects its financial performance to keep improving in Q2. It expects Q2 revenue to recover to as much as 97% of the revenue generated in the same quarter of 2019 before the pandemic. 

Delta expects capacity to recover to 84% of the 2019 level. The airline expects it operating margin to be in the range of 12% to 14%. From $20.9 billion in Q1, Delta expects to lower its adjusted net debt to $20 billion.

Executive Comments 

Delta CEO, Ed Bastian, said, “As our brand preference and demand momentum grow, we are successfully recapturing higher fuel prices, driving our outlook for a 12 to 14 percent adjusted operating margin and strong free cash flow in the June quarter.”

Delta Airlines President, Glen Hauenstein, commented, “Delta is well-positioned to capitalize on robust consumer demand and an accelerating return of business and international travel. The strength of Delta’s brand has never been more evident with record-setting performance for co-brand card acquisitions, co-brand spend and SkyMiles acquisitions in March.”

Wall Street’s Take

On April 13, Goldman Sachs analyst Catherine O’Brien reiterated a Hold rating on Delta but raised the price target to $44 from $39. O’Brien’s new price target indicates 7.3% upside potential.

The consensus among analysts is a Strong Buy based on nine Buys and three Holds. The average Delta price target stands at $49.42 and implies upside potential of 20.48% to current levels. Shares have declined 15% over the past year.

Stock Investors

At the time of writing, TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Delta Air Lines, with 2.0% of portfolios tracked by TipRanks increasing their exposure to DAL stock over the past 30 days.

Takeaway for Investors 

Delta has demonstrated remarkable resilience in the pandemic and now it should shine as travel demand rebounds with vaccines giving people more confidence to fly. 

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