DAL's Q1 Earnings Coming Up: Time to Buy, Sell or Hold the Stock?

Core Viewpoint - Delta Air Lines is expected to report a disappointing first-quarter 2025 performance due to economic uncertainties and reduced domestic air travel demand, leading to lower earnings and revenue projections [5][20]. Financial Performance Expectations - Delta is projected to report a 2.2% year-over-year increase in earnings and a 0.4% year-over-year increase in revenues for the March quarter [2]. - The Zacks Consensus Estimate for first-quarter 2025 earnings is currently at 46 cents per share, revised 55.3% downward in the past 60 days, while revenues are estimated at $13.8 billion [3]. - Adjusted earnings per share guidance has been reduced to a range of 30-50 cents from a previous range of 70 cents to$1 per share [5]. - The adjusted operating margin is now expected to be between 4-5%, down from the prior guidance of 6-8%, with an expected margin of 4.7% [6]. Revenue Outlook - The total revenues (adjusted) are now expected to increase by 3-4% year-over-year, a downgrade from the previous expectation of 7-9% growth [7]. - Domestic passenger revenues are anticipated to grow by only 0.6% year-over-year, significantly lower than the 4.6% growth recorded in the fourth quarter of 2024 [7]. Cost Factors - Labor costs are projected to rise by 8.6% compared to the first quarter of 2024, which may negatively impact the bottom line [8]. - Conversely, low fuel costs due to declining oil prices are expected to positively influence the bottom line, as fuel expenses are a significant cost for airlines [9]. Stock Performance and Valuation - Delta's stock, along with other major airlines, has seen a significant decline, with shares dropping 28% in the January-March period [12]. - Delta is trading at a forward sales multiple of 0.44X, which is lower than the industry average of 1.25X, indicating a cheaper valuation compared to peers [15]. Investment Considerations - Despite improvements in air travel demand post-pandemic, the recent slowdown, particularly in domestic travel, poses a concern for future passenger revenues [18]. - High labor costs and economic uncertainties are additional challenges, although Delta's liquidity position remains strong, providing operational flexibility [19]. - Overall, the company is expected to have an unimpressive first-quarter performance, primarily due to low passenger revenues [20].