Delta Airlines (NYSE: DAL) has recently gained momentum in the market as the fear of economic headwinds begins to dissipate. The company raised its guidance for Q2 and reinstated its dividend, signaling growth and improving profitability. Analysts are also optimistic, with many raising their price targets and ratings for Delta’s stock.
Key Points
1. Delta Airlines has raised its guidance for Q2, indicating growth and improving profitability as the year progresses. This has led to a 5% gain in the market, signaling positive investor sentiment.
2. The company has reinstated its dividend at $0.10 quarterly or $0.40 annualized, showing confidence in its financial position and future prospects. With debt in decline and growth expected, there is potential for dividend growth in the future.
3. Delta Airlines is benefiting from structural tailwinds and a constructive industry backdrop, including multi-year supply constraints and regaining reliability ratings. Analysts have been increasing their price targets and ratings for the stock, suggesting continued upward momentum and positive sentiment from institutional investors.
Delta Airlines Raises Guidance, Share Price Gains 5%
Delta Airlines (NYSE: DAL) recently announced an upward revision in its guidance for the second quarter, leading to a 5% growth in the market. The company is benefiting from structural tailwinds that are supporting its business and improving the outlook for 2024. In addition, Delta has reinstated its dividend, signaling confidence in its future prospects.
For a while, the share price of Delta Airlines struggled to gain momentum due to concerns about economic headwinds. These concerns overshadowed the underlying strength in travel demand, keeping the market near the bottom of the post-COVID trading range. However, recent developments have shown that pent-up demand is still present and the headwinds are not as strong as initially feared. As a result, Delta has been able to reinstate its dividend payment, which is set at $0.10 per share quarterly or $0.40 annually. Although this amount is less than 25% of the previous payment, it reflects the company’s commitment to reducing debt and improving its financial position.
With the company’s growth forecast and declining debt, it is expected that Delta will eventually increase its dividend. This could happen as early as the end of the second quarter of the fiscal year, but there is a possibility of a distribution growth before that.
In terms of guidance, Delta Airlines has provided preliminary figures for the second quarter of the fiscal year 2023 and 2024. The company expects revenue growth of around 17.5% for the second quarter, with earnings per share (EPS) surpassing the consensus estimate at the lower end of the range. Furthermore, in fiscal year 2023, Delta anticipates its EPS to reach the top end of the projected range, surpassing the consensus estimate. The company is also optimistic about the year 2024, with adjusted EPS expected to be at least $7.00 compared to the consensus estimate of $7.12. Delta attributes this positive outlook to a constructive industry backdrop and various structural tailwinds that are driving the business forward. These tailwinds include multi-year supply constraints and the company’s ability to regain reliability ratings. Furthermore, Delta, as the third-largest air carrier in the US, could potentially gain market share under these favorable conditions.
Analysts have reacted positively to Delta’s guidance announcement, with many raising their price targets and ratings for the stock. AlphaBetaStock.com, a leading research analyst platform, immediately picked up one revision after the release of the guidance. It is expected that more revisions will follow, including a potential increase in the price target to $50. This aligns with the general consensus of $50.50, indicating a positive trend compared to previous months and quarters. Assuming Delta performs as expected, this upward trend should continue. Delta is scheduled to report its second-quarter results in mid-July, providing further insights into its full-year outlook.
Institutional investors have been actively buying Delta Airlines stock for the past eight quarters, and their activity has been increasing over time. The second quarter of this year has seen the highest gross activity in the past seven consecutive quarters. While selling has also accelerated, the buying activity has reached its highest levels in terms of gross and net since the third quarter of 2021. Currently, institutions own 68% of Delta’s stock, and this figure is expected to grow further.
From a technical perspective, Delta Airlines’ share price experienced a 5% surge following the release of its guidance, confirming recent trends. This breakout suggests strong upward momentum in the near term, with the market potentially reaching the $49 region. Although there might be resistance at that level, breaking through it could lead to further gains, with a target of $50 or higher. In the longer term, as business conditions continue to improve over the next year or so, Delta’s share price is anticipated to return to its pre-COVID highs.
In conclusion, Delta Airlines’ raised guidance, dividend reinstatement, and positive market response indicate a promising future for the company. With strong structural tailwinds, a positive outlook for 2024, and growing institutional ownership, Delta is well-positioned to capitalize on the recovering travel demand and potentially gain market share. Investors should keep an eye on Delta’s upcoming earnings report in mid-July for further insights into its performance and future prospects.
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