Skies are clearing for Delta as stock soars 13% on earnings beat

It has been a pretty brutal year for Delta Air Lines (NYSE:DAL), and airlines in general, given all the macroeconomic and geopolitical forces pulling at air travel.

But the legacy carrier posted some good news on Thursday, reporting better-than-expected second quarter results and reinstating its full year guidance after pulling it in April due to the uncertain outlook.

Delta generated revenue of $16.65 in the quarter, down slightly from $16.66 in the same quarter a year ago. But adjusted revenue was a record $15.51 billion, up about 1% year-over-year. This narrowly beat estimates of $15.48 billion.

Net income skyrocketed 63% to $2.13 billion, or $3.27 per share mainly on higher gains on investments. Adjusted net income dropped 10% to $1.37 billion, or $2.10 per share. But, this topped estimates of $2.05 per share.

The operating margin was 12.6% in the June quarter, down 7%, while adjusted operatiung margin was 13.2%, down 10%.

Delta also did a decent job of containing costs, with operating expenses up just 1% year-over-year to $14.5 billion. Non-fuel costs rose 7%, while fuel costs, due to lower gas prices, dropped 11%.

“Delta generated record June quarter revenue of $15.5 billion, approximately 1% higher than prior year,” Glen Hauenstein, Delta’s president, said. “Through the quarter, demand trends stabilized at levels that are flat to last year and we continued to see resilience in our diverse, high-margin revenue streams.  The team did a great job leveraging Delta’s structural advantages to optimize performance in this environment.”

Skies are clearing

After first quarter earnings, Delta did not issue full year guidance due to the uncertainty that clouded its view. When Delta released Q1 earnings, it was, as always, the first major company to report. It reported earnings on April 9, which was right after President Donald Trump unveiled his massive tariffs. Markets were tanking and the economy has slowed significantly, with negative GDP in Q1.

As CEO Ed Bastian said at the time: “Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook.”

But things have changed for the better since then, with many of the reciprocal tariffs paused and the economy improving. That’s been good news for Delta, as the Q2 results show, and it has improved the company’s visibility.

“We’re not planning on paying any tariffs for aircraft deliveries, and that’s a pretty strong point of view here on the Delta side,” Bastian said on the Q2 call. “That said, we are encouraged by the progress that we see happening in the discussions in Washington.”

A big reason the stock spiked 13% on Thursday was because of the outlook. It reinstated its annual guidance, calling for earnings of $5.25 to $6.25 per share for the full fiscal year. That’s down from the Q4 guidance but the company did not then foresee the first quarter economic slowdown or massive tariff impact.

Delta also projects $3 billion to $4 billion in free cash flow for the full year, which is in line at the high end with earlier guidance.

For Q3, Delta anticipates 0% to 4% revenue growth, an operating margin of 9% to 11% and earnings of $1.25 to $1.75 per share.

“We expect the September quarter will be our best non-fuel unit cost performance of the year, with non-fuel unit costs flat to down compared to 2024.  For the full year, we remain on track to deliver non-fuel unit cost growth in the low-single digits year-over-year, consistent with our long-term target.” Dan Janki, Delta’s chief financial officer, said.

The stock is still cheap

Despite the 13% gain on Thursday, Delta stock is still down about 6% YTD. The stock remains dirt cheap with a P/E ratio of 9 and a forward P/E of 8.

Analysts have set a median price target of $60 per share for Delta, which would be about 5% higher than the current price. There were no price target upgrades immediately after Thursday’s earnings, but they could still be coming.

It looks like the rally on Thursday was based off of investors buying extremely low due to a decent earnings report. And it wasn’t just Delta as United Airlines (NYSE:UAL) rose 15% Thursday and American Airlines (NYSE:AAL) surged 14%.

Delta’s report created some hope for investors that travel will bounce back, particularly for the summer travel season. But after a 13% gain today, I don’t know if there’s enough fuel left to propel it much higher with the macroeconomic picture still fuzzy.