Delta Air Lines' reported better-than-expected second-quarter financials Thursday and raised its 2023 earnings outlook on expectations of strong air travel demand throughout the year. DAL and other airline stocks rallied early before falling Thursday.
The Atlanta-based carrier reported Thursday that Q2 profits surged more than 80% with sales jumping nearly 20% as consumers' appetite for international and domestic air travel appears to be strong.
Like many air carriers, DAL had a run of losses during the Covid pandemic. However, airlines are now benefiting from a post-pandemic rebound in travel.
As a result, airline stocks are taking off. Collectively, the 19 stocks in IBD's Transportation-Airline industry group have rallied around 49% in 2023. That's the eighth-best year-to-date increase among the 197 industries tracked by IBD.
Delta Air Lines stock veered 4% higher early before reversing down 0.5% to 47.70 Thursday during market trade. On Wednesday, DAL stock fell 1.3% to 48.01. Shares are working on a ninth straight weekly advance. Before Thursday, the stock was up around 47% so far in 2023, with a 57% gain off a March 24 low.
Airline stocks United Airlines dropped 0.3% with American Airlines falling 0.6%. Domestic-focused Alaska Air Group slipped 2.9%.
Delta Air Lines Stock: Earnings
Estimates: Analysts expected Delta earnings to grow 67% to $2.40 per share in the second quarter. Sales were predicted to increase 17% to $14.44 billion, according to FactSet.
Results: Delta reported revenue increasing 19% to $14.6 billion in Q2. The air carrier's second-quarter profits ballooned 86% to $2.68 per share.
Delta reported record international passenger revenue in Q2, with sales up 61% compared to 2022. This was primarily driven by "strong U.S. consumer demand, with southern European destinations leading results."
DAL added that domestic passenger revenue was up 8% year-over-year.
"Delta is delivering for our customers by providing strong operational performance and best in class service during this busy summer period," Chief Executive Ed Bastian said in the earnings release.
"Consumer demand for air travel remains robust. Against this constructive backdrop, we are increasing our 2023 earnings guidance to $6 to $7 per share and reiterating our recently updated outlook for $3 billion of free cash flow," Bastian said.
On June 27, the carrier raised its annual outlook, guiding expectations for 2023 profits to the top end of its prior forecast range, from $5-$6 per share. The company also forecast free cash flow at $3 billion, up from the previous outlook of $2 billion. The carrier earned $3.20 a share in 2022.
Delta President Glen Hauenstein added in a statement Thursday that air travel demand remains "robust" in the September quarter.
"We expect total revenue to be similar to the June quarter, up 11% to 14% compared to the September quarter 2022 on capacity that is 16% higher," Hauenstein said.
Stock Fundamentals
Delta shares bolted 6.8% following its June 27 outlook updates and have kept climbing. Shares topped a 40.30 entry for a cup base on June 13 after a major run-up in late May.
The guidance increase follows Delta missing Wall Street expectations for Q1 on April 13. However, the company still saw profits surge compared to last year. The air carrier reported earnings of 25 cents per share, up from a loss of $1.23 per share a year ago.
Meanwhile, revenue jumped 27% to $11.84 billion in the first quarter. The company also reported "record advance bookings for the summer," which is peak travel season.
The airlines stock reported fourth-quarter earnings on Jan. 13, after raising its Q4 guidance and giving a bullish 2023 outlook in mid-December, also on the back of robust travel demand.
Delta Air Lines stock ranks fourth in the Transportation-Airline industry group. DAL has a perfect Composite Rating of 99. DAL shares have a 94 Relative Strength Rating and a 82 EPS Rating.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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