On Friday, Barclays increased its price target for shares of Delta Air Lines (NYSE: NYSE:DAL) to $60 from the previous target of $52, while maintaining an Overweight rating on the stock. The adjustment follows Delta's recent financial guidance and management commentary on booking trends surrounding the U.S. elections.
Delta's management noted a significant decrease in bookings in the period leading up to and following Election Day, which they attributed to nearly a one percent impact on fourth-quarter revenue. Despite this, the airline's management remains positive about its trans-Atlantic unit revenue trends for the fourth quarter, expecting them to be favorable, along with improvements in short-haul Latin beach markets.
The company's guidance suggests that total unit revenues for the fourth quarter would decline by 0.5%, which would likely have been positive if not for the effects of Election Day. Delta's management has indicated that the observed booking trends are difficult to link directly to the election, especially considering the availability of absentee ballots, but they rely on real-time observations from running one of the largest airlines in the U.S.
In terms of costs, Delta anticipates roughly 3% non-fuel unit cost inflation, aligning with previous expectations. This projection leads to an earnings and margin outlook for the fourth quarter that is anticipated to surpass last year's levels.
Further insights into the airline's long-term strategies and financial planning are expected to be shared during Delta's analyst meeting scheduled for November.
In other recent news, Delta Air Lines has projected record earnings for the fourth quarter, attributing this positive outlook to robust holiday travel bookings and increased fare-setting ability. The airline anticipates an adjusted profit between $1.60 and $1.85 per share, exceeding the analyst consensus of $1.70 per share, according to LSEG data.
Analysts from firms such as Susquehanna and Bernstein SocGen Group have expressed confidence in the airline's future performance, maintaining positive ratings and raising stock targets.
Simultaneously, Delta has adjusted its flight schedule due to escalating tensions in the Middle East, suspending its New York-Tel Aviv route until the end of the year. This decision aligns with similar adjustments made by several international airlines in response to the region's rising tensions.
Furthermore, TD Cowen and Citi have retained their Buy ratings on Delta, with TD Cowen anticipating strong fourth-quarter revenue growth and EBIT margin. Citi has adjusted its earnings per share estimates based on an improved third-quarter revenue outlook and a reduction in non-operating expenses.
InvestingPro Insights
Delta Air Lines' recent financial guidance and management commentary align with several key metrics and insights from InvestingPro. The company's P/E ratio of 7.08 suggests that it's trading at a low earnings multiple, which could be attractive to value investors. This is further supported by an InvestingPro Tip indicating that Delta is trading at a low P/E ratio relative to its near-term earnings growth.
The airline's revenue growth of 7.84% over the last twelve months and 6.93% in the most recent quarter reflects its ability to generate increasing sales, despite challenges like the election-related booking fluctuations mentioned in the article. Additionally, Delta's strong return over the last month, with a 13.91% price total return, suggests that investors are responding positively to the company's performance and outlook.
An important InvestingPro Tip highlights that 8 analysts have revised their earnings upwards for the upcoming period, which aligns with Delta's management's positive outlook on trans-Atlantic unit revenue trends and improvements in short-haul Latin beach markets. This optimism is further reflected in the analysts' fair value target of $60 USD, which coincides with Barclays' new price target.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 9 more tips available for Delta Air Lines on the InvestingPro platform, providing a deeper understanding of the company's financial health and market position.
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