Delta (NYSE: DAL) is set to announce its fiscal Q2 2024 results on Thursday, July 11, with expectations of slightly below street estimates for revenue and earnings. Despite benefiting from improved capacity, the company may see some downward pressure on passenger revenue per available seat mile. Earnings are also expected to decline by 13% year-over-year to $2.32 per share due to higher costs. Despite a potentially downbeat Q2, Delta’s stock is currently trading at $46, which may present an attractive opportunity for investors.
Looking at Delta’s stock performance in recent years, the company has seen gains of 15% from early 2021 to now, compared to a 50% increase in the S&P 500 over the same period. However, Delta’s returns have been inconsistent, with underperformance in 2021 and 2022 but outperforming in 2023. Comparable heavyweights in the Industrials sector, such as CAT and HON, as well as megacap stars like GOOG, TSLA, and MSFT, have also faced challenges in consistently beating the S&P 500. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year, providing better returns with less risk.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, Delta’s stock may face challenges in the next 12 months. However, from a valuation perspective, DAL stock appears to have room for growth, with an estimated valuation of $55 per share, reflecting a 20% upside potential from current levels. This is based on an expected P/E multiple of just over 8x for Delta and anticipated full-year adjusted earnings of $6.50 per share for 2024, with the company expecting earnings in the range of $6.00 to $7.00.
In the previous quarter, Delta reported adjusted revenue of $12.6 billion, up 6% year-over-year, driven by a 7% increase in total available seat miles. The company saw its adjusted operating margin expand to 5.1% from 4.6% in the prior year quarter, attributed to lower fuel expenses. For the latest quarter, Delta is expected to post adjusted revenue of $15.45 billion, reflecting 6% year-over-year growth, in line with the company’s guidance of 5% to 7% growth. Earnings are expected to come in at $2.32 per share, down from $2.68 in the prior-year quarter.
Overall, while Delta may post a downbeat Q2, the company could have a more positive outlook for the second half of the year, potentially benefiting its stock. Additionally, despite the challenges Delta may face in the current macroeconomic environment, the company’s stock valuation suggests room for growth. Investors may want to consider Delta’s performance in comparison to its peers to make informed investment decisions. For more insights on Delta’s earnings trends and stock performance, interested investors can refer to Trefis Market Beating Portfolios and Peer Comparisons.
