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On Thursday, Raymond (NSE:RYMD) James made an adjustment to Delta Air Lines' (NYSE:DAL) financial outlook, reducing the price target from $62.00 to $60.00, while reaffirming a Strong Buy rating on the airline's shares. Currently trading at $44.27 with a P/E ratio of 6.38, InvestingPro analysis suggests Delta is trading below its Fair Value, making it one of several potentially undervalued stocks in the market. The decision comes as Delta Air Lines announced plans to limit its capacity growth in the second half of 2025 to preserve its profit margins and cash flow amid a stagnant growth environment.
Delta's strategy to maintain a low single-digit year-over-year cost per available seat mile excluding fuel (CASM-Ex) was met with approval by investors, helping to mitigate concerns raised by the company's second-quarter earnings per share (EPS) guidance for 2025, which fell short of market expectations. According to InvestingPro data, analysts forecast EPS of $7.19 for FY2025, with 15 analysts recently revising their earnings expectations downward. The lower end of the guidance was seen as conservative, considering the potential risks to demand posed by rapidly changing policy measures.
The Raymond James analyst noted that a similar approach to capacity management from United Airlines in the following week could bolster investor confidence in the airline sector. However, it remains uncertain whether United will provide such reassurance, especially after recent developments concerning tariffs.
Despite the current uncertainties, Delta is expected to adhere to its existing plan unless there is a significant positive shift in the macroeconomic landscape in the coming weeks. In light of softer revenue projections and despite a jet fuel price forecast that remains above the forward curve for the second half of 2025, Raymond James has revised Delta's EPS estimates downward by 6-9% to $5.60, $6.70, and $7.60 for the years 2025, 2026, and 2027, respectively.
The analyst concluded by emphasizing Delta's unique structural advantages compared to its legacy competitors, which are anticipated to maintain its margin superiority. These advantages, coupled with Delta's appealing valuation, robust balance sheet, and lower earnings volatility, underpin the firm's Strong Buy recommendation for Delta Air Lines' stock. With a market capitalization of $28.41 billion and a gross profit margin of 21.53%, Delta demonstrates strong financial performance. InvestingPro subscribers can access over 30 additional financial metrics and insights through the comprehensive Pro Research Report, helping investors make more informed decisions about this prominent player in the Passenger Airlines industry.
In other recent news, Delta Air Lines reported its Q1 2025 earnings, surpassing analysts' expectations with an earnings per share (EPS) of $0.46 compared to the forecasted $0.44. The company achieved a record revenue of $14 billion, exceeding the anticipated $13.11 billion. Additionally, Delta announced a 10-year maintenance agreement with UPS, further diversifying its revenue streams. Citi analysts revised their price target for Delta Air Lines, lowering it from $72.00 to $62.00, while maintaining a Buy rating on the stock. The revision reflects a more conservative revenue forecast and updated earnings projections. Citi's revised earnings per share estimates for Delta show a decrease from previous projections, expecting $5.92 for the current year and $7.50 for the following year. Despite the adjustments, Citi remains confident in Delta's cost management and potential for stock performance. These developments highlight Delta's strong financial performance and strategic partnerships amid a challenging economic environment.
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