Bernstein sees continued growth for Delta Air Lines shares, driven by premium revenue gains

On Monday, Bernstein analysts maintained their positive outlook on Delta Air Lines (NYSE:DAL) shares, reasserting an Outperform rating with a steady price target of $75.00. The $41.5 billion market cap airline has seen its stock surge over 11% in the past week, with InvestingPro data showing the company is currently trading below its Fair Value.

The endorsement follows Delta's announcement of its fourth-quarter 2024 earnings, where the airline surpassed expectations with an adjusted diluted EPS of $1.85. This figure was 5% higher than the consensus and 3% above Bernstein's own forecast, attributed to robust demand in premium, international, and corporate travel sectors.

Delta Air Lines reported that its corporate sales had risen by double digits, contributing to the company's strong performance. The airline's adjusted revenue reached $14.4 billion, 2% above the consensus, outpacing the guidance for the quarter which predicted a 2-4% growth.

The revenue increase was led by a 6% year-over-year growth, building on the company's impressive trailing twelve-month revenue of $60.3 billion. According to InvestingPro, Delta maintains strong profitability metrics with a gross margin of 22.6%.

The airline experienced an improving trend in unit revenue throughout the December quarter. The adjusted Total (EPA:TTEF) Revenue per Available Seat Mile (TRASM) saw a sequential improvement, closing at a positive 0.4% year-over-year, with premium revenue growth outpacing that of the main cabin by six percentage points.

Looking forward to the first quarter of 2025, Delta anticipates a continuation of strong demand trends. The airline projects a revenue increase of 7-9%, exceeding Wall Street's expectations of a 6% rise. This is anticipated to fuel year-over-year unit revenue growth, despite an increase in capacity. Delta's EPS guidance for the first quarter ranges from $0.70 to $1.00, with the midpoint surpassing consensus estimates by 12% and nearly aligning with Bernstein's more optimistic estimate of $0.86.

For the full year 2025, Delta expects low-single-digit growth in Cost per Available Seat Mile excluding fuel (CASMex), which aligns with the market's forecast of a 2% year-over-year increase. This projection is based on the company's efficiencies and ongoing investments in its workforce and customer experience, despite a slower pace in capacity growth.

InvestingPro analysis reveals 6 analysts have recently revised their earnings estimates upward, with the stock trading at an attractive P/E ratio of 8.9x. Subscribers can access Delta's comprehensive Pro Research Report, along with 10+ additional ProTips and detailed financial metrics.

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