Delta Air Lines reported better-than-expected fourth-quarter and full-year earnings and revenue Friday with the air carrier hitting its target of 95% EPS growth in 2023. Meanwhile, DAL stock sank Friday, tumbling from near a buy point, along with other airline stocks.
Delta reported that earnings slipped 13% to $1.28 per share while revenue increased 11% to $13.7 billion in the fourth quarter. For the full year, DAL revenue grew 20% to $54.7 billion with EPS surging 95% to $6.25.
Analysts expected EPS of $1.16 in Q4 with $13.55 billion in revenue. For the full year, Wall Street forecast earnings of $6.14 per share and sales of $54.58 billion. Meanwhile, Delta Air Lines had expected 2023 earnings of $6.00-$6.25 per share with Q4 EPS between $1.05-$1.30.
Delta also gave its initial 2024 forecast Friday, with the air carrier expecting EPS of $6-$7 and free cash flow between $3 billion-$4 billion. For Q1, Delta predicts revenue increasing 3%-6% and earnings of 25-cents to 50-cents per share.
"In 2024, demand for air travel remains strong and our customer base is in a healthy financial position with travel a top priority," Chief Executive Ed Bastian said in the earnings release Friday.
Ahead of earnings, Morgan Stanley reinstated Delta as a "top pick" airlines stock in 2024, with analyst Ravi Shanker writing that Delta held specific industry advantages.
The surge in positive airline analyst activity contrasted with events surrounding the Alaska Airlines flight 1282 incident and the ensuing inspections of Boeing 737 Max 9 model aircraft.
"We expect the market to gravitate toward DAL's compounding and unique growth story as the airlines gain more traction in 2024," Shanker wrote.
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DAL Stock Performance
Delta Air Lines stock fell 9% to 38.46 Friday during market action. On Thursday, DAL shares advanced 0.4% to 42.26. In January, DAL stock has now dropped more than 4%, trading below a 42.70 buy point in a cup-with-handle base.
In the third quarter, Delta noted steady domestic demand with passenger revenue increasing 6% compared to 2022 on 11% more capacity, as the domestic unit's revenue was down 4% year-over-year. International revenue spiked 35% with record margins across all regions.
"Robust demand for travel on Delta is continuing into the December quarter," Delta President Glen Hauenstein said in Oct. 2023.
Morgan Stanley's Shanker on Monday also upgraded American Airlines to overweight from equal weight and maintained a 20 price target on AAL shares. The analyst also has Alaska Airlines as its number two pick in the airlines space.
Shanker sees upside to ALK management in 2024 and said that the air carrier will look to "achieve industry leading margins and drive long-term growth with bright spots from strong price in the premium product mix and strength of the loyalty program."
ALK lost 5% and AAL shares plummeted 9.5% Friday. United Airlines, fresh off discovering loose fasteners during 737 Max 9 inspections mandated by the Federal Aviation Administration, sank 10.6%.
In 2023, DAL stock gained 22%. Delta ranks second in the IBD Transportation-Airline industry group. The stock has an 85 Composite Rating out of a best-possible 99. DAL stock has a 73 Relative Strength Rating and a 77 EPS Rating.
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