Is Delta Stock a Buy Post Q4 Earnings and Revenue Beat?

Last Friday, Delta Air Lines DAL reported strong fourth-quarter 2024 results, driven by upbeat air travel demand and low fuel prices. The company's earnings outlook for 2025 also looks promising. DAL’s CEO Ed Bastian expects air travel demand to remain strong in 2025 “with consumers increasingly seeking the premium products and experiences that Delta provides.” DAL’s shares have gained 6% since the earnings release.Find latest EPS estimates and surprises on Zacks Earnings Calendar.Highlights of Q4 EarningsDelta reported fourth-quarter 2024 earnings (excluding 56 cents from non-recurring items) of $1.85 per share, which surpassed the Zacks Consensus Estimate of $1.76. Earnings increased 44.5%. Revenues of $15.56 billion surpassed the Zacks Consensus Estimate of $14.99 billion and increased 9.4% on a year-over-year basis, driven by strong holiday travel demand.Strong transatlantic demand and the recovery of corporate travel aided results. Average fuel price per gallon (adjusted) fell 22% to $2.34. Delta is the first S&P 500 member in the Zacks Airline industry to report fourth-quarter results, with other airline S&P 500 members United Airlines UAL and Southwest Airlines LUV scheduled to report fourth-quarter 2024 results on Jan. 21 and Jan. 30, respectively.Robust Outlook Given by DALBastian expects 2025 to be the carrier's most successful financial year. Revenue growth and margin expansion are expected to drive profitability. Delta expects the recently witnessed acceleration in co-brand card spending and air travel demand from corporates to continue in 2025.As a result, revenues in the first quarter of 2025 are expected to grow in the 7-9% range. First-quarter 2025 earnings are expected to nearly double from first-quarter 2024 actuals. For full-year 2025, management expects earnings per share on an adjusted basis to be greater than $7.35, indicating an increase of more than 19% from 2024 actuals. Excluding the 45-cent impact of the CrowdStrike CRWD-induced outage in the September quarter, the guidance represents a growth rate in excess of 10%.Maintaining its strong cash-generating ability, DAL expects to generate more than $4 billion of free cash flow in 2025. This further supports its continuous efforts to reduce debt and bring down the leverage ratio to two times or less.Owing to the strong results delivered by DAL for the fourth quarter of 2024 and the rosy outlook, earnings estimates for 2025 and 2026 have been revised 3.1% and 1.4% upward, respectively, in the past seven days, showing that analysts are optimistic about this group’s earnings growth potential.DAL’s Strong Price PerformanceDAL stock’s upsurge is not limited to post-fourth-quarter earnings release. Shares of DAL have performed handsomely in the past year. Shares of Delta have outperformed its industry and the S&P 500 index in a year’s time.Image Source: Zacks Investment ResearchWall Street Average Target Price for DAL Suggests an UpsideBased on short-term price targets offered by 22 analysts, the Wall Street average price target is at $77.51 per share, suggesting a 19.1% upside from current levels.Image Source: Zacks Investment ResearchAttractive Valuation Picture Adds to DAL’s LusterFrom a valuation perspective, DAL is trading at a discount compared with the industry, going by the forward 12-month price-to-sales ratio. The company has a Value Score of A.Image Source: Zacks Investment ResearchHeadwinds Confronting DAL StockThe northward movement in operating expenses is hurting Delta’s bottom line, challenging its financial stability. In 2024, total operating expenses rose 6% year over year to $55.6 billion. The surge in operating expenses was primarily caused by an increase in labor costs. Expenses on salaries and other costs rose 11% in the same time.The global IT outage on July 19, 2024, impacted Delta greatly, resulting in multiple flight cancellations. Delta was the hardest hit and recovered only recently. DAL’s prolonged crisis was due to its dependence on Microsoft systems for flight crew scheduling. As a result of one of DAL’s crew tracking-related tools being affected, the rescheduling of the airline’s multiple canceled flights became difficult, given the uncertainty surrounding the arrangement of a full crew.Per Bastian, the outage cost DAL approximately $500 million in five days. DAL not only had to refund tickets for the canceled flights but also had to spend significantly on hotel accommodations and other compensation for its customers impacted by the outage. According to CEO, the severity of the impact left DAL with “no choice" but to seek outage-related damages.Final ThoughtsFor long-term investors, a single quarter’s results are not so important. They would rather base their investment decision on the underlying fundamentals. We can safely conclude that despite the impressive fourth-quarter results, investors should refrain from rushing to buy DAL now, as it is facing quite a few challenges. Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested for solid long-term prospects. The stock’s Zacks Rank #3 (Hold) supports our thesis.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Delta Air Lines, Inc. (DAL): Free Stock Analysis Report United Airlines Holdings Inc (UAL): Free Stock Analysis Report Southwest Airlines Co. (LUV): Free Stock Analysis Report CrowdStrike (CRWD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks