Will Delta Air Lines (DAL) Stock Keep Flying After Beating Q1 Expectations?

Core Viewpoint - Delta Air Lines exceeded Q1 expectations, with stock prices rising significantly due to favorable earnings and external market factors, although the stock remains down year-to-date [1][3]. Group 1: Q1 Results - Delta reported Q1 sales of $14.04 billion, surpassing estimates of $13.8 billion and increasing from $13.74 billion year-over-year [3]. - The net income for Q1 was $240 million, translating to adjusted earnings of $0.46 per share, exceeding estimates of $0.40 by 15% and slightly up from $0.45 in the same quarter last year [3]. - Operating cash flow for Q1 was $2.4 billion, with operating income at $569 million and an operating margin of 4% [4]. Group 2: Cautious Guidance - Due to economic uncertainty surrounding global trade, Delta plans to protect margins and cash flow by reducing planned capacity growth in the latter half of the year while managing costs and capital expenditures [7]. - Delta did not provide a full-year outlook but expects Q2 profitability between $1.5 billion and $2 billion, with EPS projected in the range of $1.70 to $2.30, which is below the current Zacks Consensus of $2.62 per share [8]. - Q2 sales are anticipated to be between $16.3 billion and $17 billion, aligning closely with the Zacks Consensus of $16.71 billion [8]. Group 3: Valuation - Delta's stock is currently trading at $44, with a forward earnings multiple of 5.2X, which is below the Zacks Transportation-Airline Industry average of 7.5X [9]. - The stock trades at 0.3X sales, significantly below the optimal level of less than 2X, with the industry average at 0.5X [9]. Group 4: Market Position - Delta's stock currently holds a Zacks Rank 3 (Hold), indicating a neutral position in the market [11]. - The potential for continued stock rally may depend on earnings estimate revisions as analysts assess the company's cautious guidance and the impact of tariff changes [11].