Despite Capacity Constraints, Delta Air Lines' 2Q Guidance Impresses Morgan Stanley Analyst

Morgan Stanley analyst Ravi Shanker reiterated an Overweight rating on the shares of Delta Air Lines Inc DAL and raised the price target from $65 to $70.
The analyst said that the company's 1Q was a slight miss, but 2Q guidance came in comfortably above consensus.
Revenue came in toward the low end of expectations due to capacity constraints and lower materialization rates throughout the quarter.
Delta, having re-affirmed 1Q guidance in March, reported at the mid-point of the guidance range while the street was expecting the higher end.
Capacity is expected to come in a couple points below management's initial plan as they focus on operational reliability this summer, which makes the revenue guidance even more impressive, said the analyst.
The management, the analyst said, saw strong consumer demand "across the board" which is expected to carry through the summer season.
The analyst sees FY23 guidance to be conservative, given the commentary around demand, 2Q booking trends, jet fuel, and CASMxF improvement.
The analyst believes the next long-term target could be $10 EPS in three years.
While the market clearly has broad macro concerns, DAL's gross liquidity, recently practiced recession playbook, strong franchise/management team and 3:1 risk reward make the stock extremely compelling amongst cyclicals, in the analyst's view, irrespective of macro conditions.
Price Action: DAL shares are trading higher by 0.84% at $33.65 on the last check Friday.

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