In February 2023, I analyzed Delta Air Lines (NYSE: DAL ) as an attractive alternative to Southwest Airlines. At that time, Delta outperformed as profitability increased, the operational network was more reliable and the outlook was strong. With expected revenue growth ofI'm a passionate investor from the Netherlands with 12 years of stock market experience. My articles usually contain a good overview of important investment criteria. A stock for my portfolio is of interest to me if the company has the foll ...

Core Viewpoint - Delta Air Lines, Inc. (NYSE: DAL) is initiated with a Buy rating and a price target of $57, highlighting its position as a premier US network carrier with a global presence and two operating segments: Airline and Refinery [1] Group 1: Company Overview - Delta Air Lines operates with a focus on growing loyalty and Maintenance, Repair, and Overhaul (MRO) programs, which are central to its business model [1] - The company is recognized for its durable business model and intelligent capital allocation, which are key factors in its investment appeal [1] Group 2: Research Methodology - Moretus Research employs a structured and repeatable framework to identify companies with mispriced cash flow potential and structural changes, aiming for asymmetric returns [1] - The research emphasizes rigorous fundamental analysis combined with a judgment-driven process, avoiding noise and overly complex forecasting [1] Group 3: Valuation Approach - Valuation for Delta Air Lines is based on pragmatic, sector-relevant multiples tailored to its business model and capital structure, focusing on comparability and relevance [1] - The research aims to provide professional-grade insights and actionable valuation, raising the standard for independent investment research [1]

Company Overview - Delta Air Lines (DAL) closed at $48.60, down 1.62% from the previous trading session, underperforming the S&P 500 which lost 0.56% [1] - Over the past month, DAL shares gained 17.4%, outperforming the Transportation sector's gain of 9.07% and the S&P 500's gain of 7.37% [1] Earnings Projections - The upcoming EPS for Delta Air Lines is projected at $1.97, indicating a 16.53% decline compared to the same quarter last year [2] - Revenue is estimated to be $16.13 billion, reflecting a 3.2% decrease from the corresponding quarter of the prior year [2] Full-Year Estimates - Full-year Zacks Consensus Estimates predict earnings of $5.26 per share and revenue of $60.9 billion, representing year-over-year changes of -14.61% and -1.2% respectively [3] - Recent changes to analyst estimates for Delta Air Lines are important as they indicate shifting business trends [3] Stock Performance and Valuation - The Zacks Rank system, which assesses estimate changes, currently ranks Delta Air Lines at 3 (Hold) [5] - Delta Air Lines has a Forward P/E ratio of 9.39, slightly above the industry average of 9.31, and a PEG ratio of 2.41 compared to the industry average of 0.89 [6] Industry Context - The Transportation - Airline industry holds a Zacks Industry Rank of 134, placing it in the bottom 46% of over 250 industries [7] - The top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Core Insights - Delta Air Lines is experiencing growth in its top line due to customer-friendly initiatives and fleet upgrades, but it faces challenges with weak liquidity and rising operating expenses [1][5][6] Group 1: Customer Initiatives and Brand Enhancement - Delta's partnership with Missoni aims to elevate luxury in its Delta One premium cabin, enhancing the in-flight sleep experience with new bedding sets and amenity kits [2] - The airline is expanding its service with over 52 new nonstop routes to cater to increasing leisure travel demand, enhancing convenience for travelers from key U.S. cities to popular Caribbean and Latin American destinations [3] Group 2: Financial Performance and Shareholder Returns - Delta announced a 50% increase in its quarterly dividend, raising it to 15 cents per share, marking the first increase since resuming dividends post-COVID-19 [4] - The airline's current ratio stands at 0.38, indicating liquidity concerns as it suggests insufficient cash to meet short-term obligations [6] Group 3: Operating Expenses and Labor Costs - High operating expenses are negatively impacting Delta's profitability, with labor costs rising 8% year-over-year to $4.1 billion, accounting for 30.3% of total operating expenses [5]

Core Viewpoint - Delta Air Lines (DAL) and Southwest Airlines (LUV) are both significant players in the U.S. airline industry, facing challenges due to tariff-induced economic uncertainties and operational issues, with DAL currently appearing to be the more favorable investment option [1][10][16]. Summary by Sections Delta Air Lines (DAL) - DAL has withdrawn its full-year 2025 outlook due to economic uncertainties and is reducing costs by trimming capacity [3]. - Despite these challenges, DAL beat the Zacks Consensus Estimate for earnings, marking its second earnings beat in the last four quarters [4]. - Recent positive developments regarding tariffs, including a 90-day deal between the U.S. and China to reduce reciprocal tariffs, are beneficial for DAL, which has a global presence [5]. - The decline in oil prices is expected to positively impact DAL's bottom line, as fuel expenses are a significant cost for airlines [5]. - DAL resumed paying quarterly dividends in 2023, increasing its payout by 50% in June 2024, indicating confidence in its cash flow and prospects [6]. - The airline ended the first quarter of 2025 with cash and cash equivalents of $3.7 billion, exceeding its current debt level of $2.9 billion, and has a times interest earned ratio of 7.7, which is favorable compared to industry levels [7]. Southwest Airlines (LUV) - LUV incurred a loss in the first quarter of 2025 due to high non-fuel costs, with cost per available seat mile (excluding fuel) increasing by 4.6% year over year [10]. - The airline did not reaffirm its earnings guidance for 2025 and 2026, facing operational challenges from activist investor Elliott Investment Management, which has led to disruptions in flight schedules and customer service [11]. - LUV has decided to end its long-standing free baggage policy, marking a significant change in its customer service approach [12]. - The airline's fleet plans are hindered by delivery delays of the Boeing 737 MAX, which are expected to require substantial capital expenditures [13]. - LUV's dividend yield is higher, but the ongoing issues with Elliott and Boeing present unique challenges that may affect its growth prospects [12][16]. Conclusion - Both DAL and LUV are impacted by tariff-induced uncertainties, but DAL's financial stability and recent positive developments position it as a better investment choice compared to LUV, which faces additional operational challenges [15][16].

Group 1 - United Airlines Holdings Inc (UAL) and Delta Air Lines Inc (DAL) have been upgraded to "buy" from "neutral" by UBS, with price targets set at $105 and $96 respectively [1] - UAL shares are currently trading at $79.08, up 1.2% today, but down 18.5% year-to-date; however, they have gained 14% this quarter [1] - DAL shares are trading at $51.16, up 0.5% today, down 15% year-to-date, but have also gained 17% this quarter [2] Group 2 - Both UAL and DAL have been rejected by their 80-day moving averages last week, indicating a similar technical setup [2] - There are no sell ratings on either stock, and the potential for a short squeeze has been exhausted [2] - Options for both UAL and DAL are affordably priced, with their Schaeffer's Volatility Indexes ranking in the 16th and 15th percentiles of their annual range [3] Group 3 - Schaeffer's Volatility Scorecards for UAL and DAL are at 95 and 99 respectively, indicating a history of exceeding option traders' volatility expectations over the past year [3]

Core Viewpoint - Delta Air Lines is experiencing a notable stock performance, with a recent price of $50.92, reflecting a 1.27% increase, outperforming major indices like the S&P 500, Dow, and Nasdaq [1] Company Performance - Delta Air Lines' stock has increased by 23.08% over the past month, significantly surpassing the Transportation sector's gain of 12.07% and the S&P 500's gain of 9.81% [1] - The upcoming earnings disclosure is projected to show earnings of $1.97 per share, a year-over-year decline of 16.53%, with anticipated revenue of $16.13 billion, indicating a 3.2% decrease from the same quarter last year [2] - For the entire fiscal year, earnings are projected at $5.26 per share and revenue at $60.9 billion, reflecting declines of 14.61% and 1.2% respectively from the prior year [3] Analyst Estimates - Recent changes in analyst estimates suggest a favorable outlook on Delta Air Lines' business health and profitability, with the Zacks Consensus EPS estimate moving 2.25% lower in the past month [4][6] - Delta Air Lines currently holds a Zacks Rank of 3 (Hold), indicating a neutral position in the market [6] Valuation Metrics - Delta Air Lines has a Forward P/E ratio of 9.56, slightly above the industry average of 9.52, suggesting it is trading at a premium [7] - The company has a PEG ratio of 2.45, compared to the Transportation - Airline industry average of 1.04, indicating a higher valuation relative to expected earnings growth [8] Industry Context - The Transportation - Airline industry is ranked 180 out of over 250 industries, placing it in the bottom 28%, which may impact overall performance [9]

Core Viewpoint - Delta Air Lines has seen a 23.3% increase in share price over the past month, outperforming the S&P 500, but there are concerns about whether this positive trend will continue leading up to the next earnings release [1] Estimates Movement - Consensus estimates for Delta Air Lines have trended downward over the past month, with a significant shift of -22.88% [2] VGM Scores - Delta Air Lines currently holds a Growth Score of B, a Momentum Score of F, and an A grade for Value, placing it in the top quintile for the value investment strategy. The overall aggregate VGM Score is A, which is relevant for investors not focused on a single strategy [3] Outlook - The downward trend in estimates indicates a negative shift, and Delta Air Lines holds a Zacks Rank of 3 (Hold), suggesting an expectation of in-line returns in the coming months [4]

Expansion Plans - Delta Air Lines (DAL) plans to introduce nonstop flights to Copenhagen and Stockholm, along with over 35 destinations in Scandinavia, through its partnership with Scandinavian Airlines System (SAS) [1] - Nonstop flights from Minneapolis–St. Paul to Copenhagen will operate three times a week starting May 22, and daily flights from New York–JFK to Copenhagen and Stockholm will commence on April 14 [2] Financial Performance - DAL's international revenues increased by 7% year over year in Q1 2025, indicating strong demand for long-haul travel despite tariff uncertainties [3] - Over the past 30 days, DAL shares gained 24.9%, outperforming the Zacks Transportation-Airline industry's 23.1% increase and American Airlines' 15% gain [4] Market Conditions - Easing trade tensions have positively impacted DAL stock, with indications that tariffs on Chinese goods may be reduced [8][10] - The airline industry has faced challenges due to trade tensions, but recent developments have contributed to a rebound in airline stocks [7][10] Cost Management - Declining oil prices have led to a 7% year-over-year decrease in aircraft fuel expenses in Q1 2025, benefiting DAL's profitability [11] - High labor costs, however, have increased by 11% in 2024, posing challenges to the bottom line [18] Shareholder Initiatives - DAL's management has approved a $1 billion share repurchase program, expected to be completed by June 30, 2028, alongside a quarterly dividend of 15 cents per share [12] - The company aims to return over $2 billion to shareholders over the next three years, reflecting confidence in cash flow and future prospects [12] Valuation Metrics - DAL stock is considered attractively valued, trading at a forward price-to-sales multiple of 0.47, lower than the industry average and competitors like American Airlines and United Airlines [13] - The Wall Street average target price for DAL stock is $59.73, suggesting an upside of more than 33% from current levels [16]

Core Viewpoint - Delta Air Lines is recognized as a best-in-class airline that is executing at a high level, with growing earnings, reducing debt, and expanding margins, yet its stock is trading at a significant discount to its fair value, presenting an opportunity for approximately 50% share appreciation through 2026 [1] Financial Performance - Delta Air Lines is experiencing growth in earnings while simultaneously reducing its debt levels and expanding profit margins [1] Investment Opportunity - The current stock price of Delta Air Lines is seen as undervalued, indicating a potential for substantial share price appreciation in the coming years [1]