By Rajesh Kumar Singh
CHICAGO (Reuters) – Delta Air Lines will likely raise its full-year earnings outlook when it shares its near- and medium-term business strategy with investors on Tuesday, analysts said, citing strong travel demand and lower fuel costs.
Some analysts are also expecting the Atlanta-based carrier to offer more details of its plan to grow its loyalty credit card and jet maintenance and repair businesses.
The company has forecast an adjusted profit of $5 to $6 per share for 2023. But with no let-up in travel demand, particularly for overseas trips and a moderation in fuel costs, analysts have revised up Delta’s profit estimates.
Savanthi Syth, airline analyst at Raymond James, expects it to lift the full-year earnings forecast by at least 50 cents a share.
Similarly, Daniel McKenzie, an analyst at Seaport Research Partners, now expects the company to earn $6.25 a share this year, a 12% increase from his previous estimate.
While rising interest rates, high inflation and mounting job losses have slowed down parts of U.S. economy, pent-up travel demand as well as constrained airline capacity due to shortages of aircraft and labor have underpinned ticket sales.
“Structural impediments to industry capacity and resilient demand point to better revenue this year,” McKenzie said.
Boosting the outlook, jet fuel costs in North America are down about 30% from a year ago.
In a sign of growing confidence in its ability to generate free cash flow, Delta this month reinstated its quarterly dividend, which was suspended in March 2020 during the COVID-19 pandemic.
The company has forecast free cash flow of more than $2 billion this year.
Citi analyst Stephen Trent expects Delta’s updated earnings guidance to be a catalyst for strong gains in its shares over the next 30 days. The airline’s shares are up about 31% this year.
(Reporting by Rajesh Kumar Singh; Editing by Jamie Freed)
