Delta(US:DAL) Yahoo Finance·2026-01-01 16:20Valuation Insights - Delta Air Lines is currently undervalued due to outdated market assumptions, presenting a potential opportunity for value investors to achieve exceptional returns over the next decade [1] - Analysts project earnings per share of $5.88 in 2025 and $7.26 in 2026, resulting in a price-to-earnings (P/E) ratio of 11.8 for 2025 and 9.6 for 2026, indicating attractive valuations [2] - Despite these attractive valuations, Delta trades at a low earnings multiple due to specific market fears that may not be justified [3] Future Earnings and Cash Flow - Confidence in Delta's ability to generate sustainable earnings and free cash flow is crucial, with expectations of free cash flow of $3.4 billion in 2025, $3.9 billion in 2026, and $4.4 billion in 2027 [4] - The airline's management has restructured its business model, focusing on premium offerings, loyalty programs, co-branded credits, and differentiated pricing strategies to secure long-term revenue streams [5] Industry Context - The airline industry has historically been cyclical, with significant profitability fluctuations, which poses risks for companies with high debt levels, such as Delta, which has an adjusted net debt of $15.6 billion against a market cap of $45.4 billion [6] - The industry's history is marked by booms and busts, driven by economic sensitivity and airlines' tendency to maintain capacity during downturns, leading to intense ticket pricing competition and financial instability [7]