Will Second Quarter Earnings Push Delta Air Lines Stock Higher?

DAL: Delta Air Lines logo
Delta Air Lines

Per recent reports, Delta Air Lines (NYSE: DAL) plans to expand its workforce by next year as domestic air travel demand recovers – highlighting expectations of a complete recovery during the latter half of the year. Notably, the TSA checkpoint figures and Delta Air Lines stock are around 20% below pre-pandemic levels. While the company observed $3.7 billion of operating cash outflow last year, the first quarter figures remained positive thanks to growing passenger traffic and improving efficiency figures. Thus, the $9 billion drop in the stock’s market capitalization since February 2020 indicates room for growth as the company generates operating cash assisted by rising demand.  The second quarter revenues are expected to grow substantially over the prior year as highlighted in our interactive dashboard analysis, Delta Air Lines Earnings Preview.

Fundamentals improved during the first quarter

Delta Air Lines revenues declined by 60%(y-o-y) to $4 billion in the first quarter, resulting in a net loss of $1.2 billion. The company increased total capacity by 10% (q-o-q) to match rising demand and expand the top line. Thus, the operating cash flow turned positive to $691 million during the first quarter. Considering a 50% improvement in TSA checkpoint figures in the second quarter, we expect revenues to observe a 56% sequential improvement, lowering net loss per share to $1.50.

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How has DAL stock fared in comparison to the S&P 500?

DAL stock declined from levels of around $58 in February 2020 (pre-crisis peak) to levels of around $22 in March 2020 (as the markets bottomed out), implying DAL stock lost 62% from its approximate pre-crisis peak. With the easing of restriction measures, the stock has more than doubled to $45 and we expect more room for growth given the rising air travel demand.

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