By Callum Keown
Delta Air Lines beat earnings expectations in the first quarter and offered upbeat guidance as it flagged continuing strong travel demand.
The stock jumped 4.1% ahead of the open Wednesday.
The airline reported adjusted earnings per share (EPS) of 45 cents on revenue of $12.6 billion — record first-quarter revenue. Wall Street was expecting earnings of 36 cents per share on revenue of $12.5 billion, according to FactSet estimates.
Its second-quarter outlook for EPS of between $2.20 and $2.50 came in above the analysts’ consensus of $2.22.
International travel remains strong, while corporate travel demand is accelerating, Delta noted. That’s good news for other large-network airlines — United Airlines stock rose 3.4% and American Airlines was up 2.7% ahead of the open.
It’s also a reason to believe Delta can keep outperforming.
Despite the earnings beat and impressive guidance, Delta stuck to its full-year outlook for EPS of between $6 and $7. Rising fuel prices could be a factor in that decision — Brent crude prices jumped above $90 per barrel to six-month highs last week as tensions in the Middle East mounted. The global average jet fuel price rose 4.3% to $111.30 last week.
Delta has outperformed its peers this year and the carrier’s first-quarter earnings should ensure it maintains its lead.
Delta stock has climbed 17.6% so far in 2024, through Tuesday’s close, outperforming United Airlines, which is up 5.3%, and American Airlines, which has risen 1.5%. The U.S. Global JETS ETF is up 7.4% this year. Only the rebounding JetBlue Airways and Frontier Group have performed better in 2024 but Delta has comfortably outperformed both over the past year.
But it hasn’t been an entirely smooth flight path. The shares tumbled in January after the airline forecast full-year earnings per share of between $6 and $7, missing a long-term target for EPS of more than $7 in 2024. Whether that guidance changes again was a key question for investors heading into earnings. The answer, for now, is no.
As the first airline to report earnings, Delta’s results and commentary will be closely watched across the sector.
The first quarter may not move the dial for the sector as it’s typically the weakest for airlines. But there’s plenty in Delta’s outlook to lift the rest of the sector.
Second-quarter guidance will be key this earnings season, particularly as the comparable period in 2023 was a bumper one. Delta reported record revenue and profitability in the June quarter last year.
The upper end of Delta’s earnings guidance range, $2.50 per share, still has the airline falling short of last year’s $2.68, but it’s a lot closer than the $2.22 expected by Wall Street.
That gives hope for the broader sector, particularly those more exposed to business travel.
The airline said managed corporate sales jumped 14% year over year in the first quarter, led by the return of large corporate accounts in the technology, consumer services and financial services sectors. It added that a recent survey found 90% of companies expect their travel volumes to increase or stay the same in the June quarter and beyond.
Write to Callum Keown at callum.keown@barrons.com