Delta(DAL) ZACKS·2024-12-03 17:40Core Viewpoint - Delta Air Lines (DAL) is experiencing growth driven by strong air travel demand and falling oil prices, but faces challenges from rising labor costs and high non-fuel unit costs [4][6][13]. Financial Outlook - DAL management expects 2025 revenues to grow in mid-single digits from 2024 figures and plans to expand capacity by 3-4% [1]. - For the fourth quarter of 2024, DAL anticipates adjusted earnings of 1.85 per share and total revenues in the range of 14.2 billion, reflecting a 2-4% increase from the same quarter in 2023 [2]. - Adjusted earnings are projected to grow 10% annually over the next three to five years, with operating margins expected in the mid-teens [3]. Market Demand - The recovery of air travel demand post-pandemic is robust, particularly in leisure travel, with corporate travel sales up 7% year-over-year in Q3 2024 [4]. - DAL expects a record number of passengers during the Thanksgiving holiday period, projecting 6.5 million passengers from Nov. 22 to Dec. 3, a 5% year-over-year increase [5]. Cost Factors - Falling oil prices, which decreased by 14% in Q3 2024, are beneficial for DAL as fuel expenses are a significant cost [6][7]. - DAL's fuel expenses decreased 6% year-over-year to 2.2-$2.4 per gallon for Q4 2024 [7]. Stock Performance - DAL shares have outperformed its industry and American Airlines (AAL) over the past three months, driven by strong air travel demand and low fuel costs [8]. - DAL is trading at a discount compared to the industry, with a forward 12-month price-to-sales ratio below its five-year median [12]. Cost Challenges - Non-fuel unit costs increased by 3% year-over-year in the first nine months of 2024, primarily due to an 11% rise in salaries related to a new pilot contract [13]. - The adjusted cost per available seat mile (CASM) rose 5.7% year-over-year in Q3 2024, contributing to a 26.1% decrease in earnings [14][15].