On Friday, Seaport Global Securities maintained a Buy rating on shares of Delta Air Lines (NYSE:DAL), with a steady price target of $56.00. The firm's outlook for the airline remains unchanged for the years 2025 and 2026, based on the stock trading at 8 times the estimated earnings per share (EPS) for 2025.
Moreover, using enterprise value to EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) as a secondary valuation metric, the firm suggests a potential stock price of $61 based on their 2025 EBITDAR forecast, and $67 for 2026.
The airline's current share price reflects a free cash flow (FCF) yield of 13% to 15% based on projections for 2025 and 2026. This leads to the anticipation of a $5 billion, 3-year stock buyback program to be announced on its investor day. This expectation is consistent with Delta Air Lines' previous announcements in 2015 and 2017.
Seaport Global Securities highlighted Delta's corporate sales for the third quarter of 2024, noting a 7% year-over-year increase. Growth was particularly strong in the technology, media, and banking sectors, with double-digit increases. This performance is seen as a positive indicator for the airline sector, and especially for United Airlines.
The analysis provided by Seaport Global Securities suggests that Delta Air Lines is positioned favorably in the market. The firm's valuation methods and Delta's financial projections underpin the maintained Buy rating and $56.00 price target. The expected stock buyback program is seen as a likely move by Delta, reflecting a pattern in the company's strategic financial decisions. Delta's recent corporate sales growth further supports the analyst's positive outlook on the stock.
In other recent news, Delta Air Lines has been in the limelight due to its upbeat revenue trends and increased fare-setting ability. The airline anticipates a record fourth-quarter adjusted profit between $1.60 and $1.85 per share, surpassing the analyst consensus. This positive outlook is attributed to robust holiday travel bookings. Barclays, Susquehanna, and Bernstein SocGen Group have expressed confidence in the airline's future performance, raising their stock targets.
On the other hand, Delta has had to adjust its flight schedule amid Middle East tensions, suspending its New York-Tel Aviv route until year-end. This aligns with similar adjustments made by several international airlines due to the region's rising tensions.
Despite these challenges, Delta's management remains optimistic about its trans-Atlantic unit revenue trends for the fourth quarter. Analysts from TD Cowen and Citi have also retained their Buy ratings on Delta, anticipating strong fourth-quarter revenue growth and EBIT margin. These recent developments reflect the airline's resilience and adaptability in the face of fluctuating market conditions.
InvestingPro Insights
Delta Air Lines' recent performance and future outlook are further supported by real-time data from InvestingPro. The company's P/E ratio of 7.08 aligns with Seaport Global Securities' valuation based on 8 times the estimated 2025 EPS. This low earnings multiple is highlighted as an InvestingPro Tip, suggesting the stock may be undervalued relative to its earnings potential.
The airline's strong financial health is evident in its revenue of $60.12 billion over the last twelve months, with a 7.84% growth rate. This robust performance is reflected in Delta's market capitalization of $32.25 billion. An InvestingPro Tip notes that Delta is a prominent player in the Passenger Airlines industry, which corroborates Seaport Global Securities' positive outlook on the company.
Investors might also be interested to know that Delta has shown a strong return over the last month, with a 13.91% price total return. This recent performance, coupled with the company's profitability over the last twelve months, supports the analyst's bullish stance on the stock.
For those seeking more comprehensive insights, InvestingPro offers additional tips and analysis on Delta Air Lines. In fact, there are 5 more InvestingPro Tips available for DAL, providing investors with a deeper understanding of the company's financial position and market performance.
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