On Wednesday, Citi reaffirmed its Buy rating on Delta Air Lines (NYSE:DAL) stock, maintaining the price target at $65.00.
The financial institution's analysis included several forecast adjustments for the airline company, taking into account an anticipated improvement in third-quarter 2024 revenue, a reduction in non-operating expenses for the same period, and a slight uptick in estimated costs per available seat mile excluding fuel for the years 2025 and 2026.
Citi has raised its third-quarter 2024 earnings per share (EPS) estimate for Delta from $1.37 to $1.51. Additionally, the full-year EPS forecasts have been adjusted to $6.05 for the current year, from a previous estimate of $5.98, and to $7.19 and $8.42 for the next two years, down from earlier projections of $7.67 and $9.03, respectively.
Despite these changes, the firm has chosen to keep the price target for Delta Air Lines stock unchanged. To justify the steady target price, Citi shifted the target earnings multiple from 8.5 times to 9 times, applying this multiple to the projected 2025 EPS. This revised multiple is still within what Citi considers the fair value range for Delta, which is between 8 and 9 times the earnings.
The adjustments reflect a nuanced view of Delta's financial trajectory, considering various operational factors. The airline's better-than-expected revenue performance for the upcoming third quarter has been a key positive factor, while the increase in estimated costs excluding fuel presents a more conservative outlook for the following years.
Citi's analysis and maintained price target suggest a steady confidence in the airline's stock value, even as it incorporates new data and projections into its financial model for Delta Air Lines. The firm's outlook remains within the previously established fair value range, indicating a consistent approach to evaluating the airline's stock.
In other recent news, Delta Air Lines has announced a suspension of its flights between New York and Tel Aviv until the end of the year due to heightened security concerns in the Middle East. This development comes as several international airlines have also suspended their flights to the region.
Meanwhile, Delta has maintained its Buy rating from financial services firm TD Cowen, despite recent challenges including an anticipated revenue shortfall of $380 million for the current quarter due to a software update disruption.
The airline also recently provided an investor update at the Morgan Stanley Laguna Conference, discussing various operational and financial aspects. Furthermore, Delta is among the four major airlines under investigation by the U.S. Department of Transportation for their loyalty programs' practices. These recent developments highlight the dynamic and complex nature of the airline industry.
InvestingPro Insights
As we consider the future of Delta Air Lines (NYSE:DAL), InvestingPro data offers some compelling metrics that align with Citi's optimistic stance. With a market capitalization of $30.69 billion and a low P/E ratio of 6.81, Delta is trading at an attractive earnings multiple. This valuation is underscored by a solid revenue growth of 7.84% over the last twelve months as of Q2 2024, showing the company's ability to increase its income. Additionally, Delta's strong return over the last month, with a 15.51% increase in its stock price, reflects investor confidence and the company's robust position in the Passenger Airlines industry.
InvestingPro Tips highlight Delta's high shareholder yield and a noteworthy P/E ratio that is low relative to near-term earnings growth, which could be of interest to value-oriented investors. These factors, along with the analysts' predictions that Delta will be profitable this year, support the view that the airline's stock holds potential for shareholders. For those looking to delve deeper into Delta's financial health, InvestingPro provides additional insights. Currently, there are 9 more InvestingPro Tips available that could further aid investors in making informed decisions (https://www.investing.com/pro/DAL).
These metrics and tips from InvestingPro resonate with the article's emphasis on Delta's financial adjustments and Citi's maintained Buy rating, offering readers a broader context for understanding the airline's stock performance and potential. The InvestingPro data complements the article's analysis, providing a snapshot of Delta's financial health and market position, which could be instrumental for investors considering this stock.
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