Delta’s outlook for the rest of the year, particularly the critical summer travel season, may be more important than the numbers.
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Airline earnings kick off Thursday with Delta Air Lines scheduled to report first-quarter results before the market opens.
Here’s a snapshot of Wall Street’s expectations and what could move the stock:
Delta (ticker: DAL) is expected to report revenues of $4 billion, down 53% from the first quarter of 2020. Analysts forecast a loss of $1.6 billion based on Ebitda, or earnings before interest, taxes, depreciation, and amortization, according to consensus estimates. Wall Street is looking for a pretax loss $2.3 billion and a loss of $2.91 in adjusted earnings per share.
The airline is also expected to continue racking up operating losses of $12 million to $14 million a day, though it expects to turn cash-flow positive this spring.
More important than the first-quarter numbers, however, may be Delta’s outlook for the rest of the year, particularly the critical summer travel season. Analysts will also be looking for insights into Delta’s core business and international markets.
Delta said last month that it’s seeing some improvements. The carrier said it expected revenue in March to be 40% higher than February, though the airline forecast total revenue in the quarter at the lower end of its prior guidance due to weak sales in January and February.
Revenues are now being fueled by domestic and short-haul international travel, the airline said at a JP Morgan industrials stock conference in March. But bookings for travel beyond 60 days was tracking down 3% versus 2019 levels, a sequential improvement over the 10% decline in bookings the airline saw in January compared to 2019 levels.
Long-haul flights to Europe, Asia, and other regions are expected to remain depressed, however, partly due to ongoing travel bans and quarantine rules at international destinations.
Delta’s stock has rallied 48% in the last six months, which may sound impressive. But it’s actually a laggard: The NYSE Arca Airline Index is up 76% over the same span. Delta is also trailing behind the sector this year, up 20% versus a 27% gain for the index.
Wall Street’s average target on the stock is $52.60, up only slightly from recent prices around $48.50
Cowen analyst Helane Becker reiterated a market-perform rating last week. The stock is now trading at 8 times estimated 2023 earnings, a slight premium to its historical multiple, she wrote in a report.
While the stock is now down just 20% from pre-pandemic highs, its 2021 revenues are expected to be 42% below 2019 levels, “suggesting the shares may take a break before heading higher,” she wrote. Delta’s exposure to corporate and international travel “will continue to weigh on near-term results.”
Other analysts sound more upbeat. Bernstein’s David Vernon maintained an Outperform rating last week and hiked his price target to $64 from $61.
“As we begin to re-open European markets, Delta’s historic position of strength in the Transatlantic puts them in good shape to be among the first to participate in a meaningful international recovery,” he wrote.
Seaport Global Securities’ Daniel McKenzie maintained an even higher target of $66. Demand trends are improving, he wrote in a recent note, and as international corridors gradually reopen, Delta’s bookings should pick up. Near-term challenges don’t reflect the fact that Delta is likely trading on a one-to-two year outlook, which he views quite favorably.
Write to Daren Fonda at [email protected]
