After record-breaking air travel over the Thanksgiving holiday period, investors could be forgiven for expecting more from
Delta Air Lines
’ mid-quarter update.
The carrier reiterated its fourth-quarter and full-year guidance Wednesday ahead of a presentation at Morgan Stanley’s Global Consumer and Retail Conference in New York.
Some will focus on the fact things haven’t worsened for Delta, and perhaps the wider industry, since the guidance was first issued in October. CEO Ed Bastian said the guidance is a “sigh of relief for some given how the year has been” at the airline’s presentation.
For others, it will be disappointing there’s no increase.
That may explain why the stock was wavering in the premarket before relief won out and the shares rose 4.5% to $39.29 in early trading Wednesday.
The broader sector enjoyed gains, as
United Airlines
and
American Airlines
both climbed 4% and
JetBlue Airways
rose 4.6%.
Citi analysts, led by Stephen Trent, said they were “very encouraged” that Delta reiterated its full-year guidance, which they said came on the back of strong travel demand for the network carriers. They have a Buy rating on the stock and target price of $56.
Delta stock has outperformed those of peers this year, climbing 14.5% so far in 2023. Only
Hawaiian Airlines
parent
Hawaiian Holdings
has risen more—35%—but only after a proposed merger with
Alaska Air Group
gave shares a 193% boost in a single day on Monday.
The profit guidance is also slap bang in the middle of analysts’ expectations. Delta expects full-year earnings per share of $6 to $6.25, while the analyst consensus is $6.12, according to FactSet. For the fourth quarter it sees earnings per share of $1.05 to $1.30, compared with estimates for $1.15.
Delta expects revenue in the current quarter to grow between 9% and 12% from last year, and sees full-year revenue climbing 20%.
The very same guidance helped send the stock down 5.2% in the space of two days when it was first released along with the carrier’s third-quarter earnings in October. The shares have climbed more than 10% since then as the broader airline sector has mounted a recovery after months of downward pressure.
Strong demand over Thanksgiving appeared to help keep the sector’s momentum going. The Sunday after Thanksgiving was the busiest day in U.S. aviation history as more than 2.9 million passengers were screened at airports across the country, according to Transportation Security Administration data. Seven of the 10 busiest days in history have come in the past six months.
However, during earnings season, airlines flagged an emerging trend of weaker-than-normal off-peak travel periods and stronger peak periods. The former may well be offsetting the latter.
While it could still happen, anyone hoping that a series of guidance hikes will send airline stocks flying higher may want to temper their expectations slightly. The sense of relief looks to be enough for that.
Write to Callum Keown at [email protected]
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