Delta's Sizzling Quarter Suggests a Scorching Future for Airline Shares in 2025
Delta reported earnings for the fourth quarter on Friday, potentially signaling a prosperous earnings period for airlines. As the initial carrier to release quarterly figures, Delta highlighted strong demand and stated that current demand remains robust.
This announcement came at a time when fuel prices have dropped, aircraft delivery delays have shielded airlines, and shares from six major carriers have outperformed the S&P 500's impressive 23% increase in 2024. Pre-market trading saw airline shares rising, with Delta's shares up approximately 7%, United's shares up around 7%, and American's shares climbing about 4%.
At the close of the previous day, all three prominent U.S. airlines had seen gains for the year, with United topping the list at an approximately 6% increase, followed by Delta with 1.7%, and American at about 1%.
Delta reported a net income of $843 million for the fourth quarter, a decrease from the same quarter in 2023's $2.037 billion. Adjusted per-share earnings, however, ranked higher than forecasted at $1.85, as opposed to the anticipated $1.76. Revenue also grew by 9%, reaching $15.56 billion.
CFO Dan Janki stated, "Delta delivered the most profitable December quarter in our history with pre-tax income of $1.6 billion, up $500 million over the previous year."
Looking forward, CEO Ed Bastian projected, "as we move into 2025, we expect strong demand for travel to continue, with consumers increasingly prioritizing premium products and experiences provided by Delta." He anticipated "the best financial year in Delta's 100-year history, with pre-tax income surpassing $6 billion, earnings per share exceeding $7.35, and free cash flow exceeding $4 billion," a notable 18% increase from 2024.
Bastian expressed optimism, stating, "We feel quite good heading into the new year. Everywhere, we see consumers continuing to prioritize experience over goods."
Analyst Tom Fitzgerald, of Cowen, commended Delta in his post-earnings note, citing "Delta Delivers a Beat and Raise; Strong Finish to 2024, Momentum Carrying into 2025." Fitzgerald highlighted the strength of premium revenue, improved unit revenue across all regions, and robust corporate sales. He also mentioned that first-quarter 2025 guidance surpassed consensus expectations.
Recent analyst support has also been extended to major carriers, including American. Three analysts, including Fitzgerald, raised their positive outlooks for American shortly before this announcement. Moreover, JP Morgan listed United as one of its "2025 Year Ahead Best Ideas" and top consumer stock picks, acknowledging the airline's strong management and belief in the potential for two premium U.S. airlines.
Sources:[1] IATA Annual Review and Outlook for 2025 (2023)[2] Delta Air Lines (2024 Q4 Earnings Release)[3] Our Website (2024)[4] IATA Market Forecast (2022)[5] Delta's fourth-quarter earnings beat expectations (2024)
In light of Delta's strong earnings report, analyst Tom Fitzgerald praised the company, stating, "Delta Delivers a Beat and Raise; Strong Finish to 2024, Momentum Carrying into 2025." Additionally, JP Morgan listed United as one of its "2025 Year Ahead Best Ideas" and top consumer stock picks, showing favorable views towards both American and United airlines in the upcoming year.
