Raymond James Raises Delta Air Lines Price Target On Platinum Card Deal Renewal

Delta Air Lines, Inc. DAL has renewed its contract with American Express Company AXP to offer their co-branded Platinum Card through 2029.

Delta Air Lines posted strong first-quarter earnings Wednesday and announced a unit revenue outlook that was slightly higher than expected. The earnings update highlights a more diversified and resilient earnings and cash flow profile, according to Raymond James

The Analyst

Savanthi Syth reiterated an Outperform rating on Delta Air Lines and raised the price target from $60 to $68.

The Thesis

Delta’s recent AmEx contract renewal is expected to add $500 million in 2019, Syth said in a Wednesday note.

This takes the company’s revenue guidance for 2019 from $3.7 billion to over $4 billion, which is expected to ramp to $7 billion by 2023, the analyst said. 

Improved economics should boost Delta’s profitability, Syth said. Major U.S. airlines generate around 50-60 percent of their EBIT margins from co-branded credit card relationships, with non-credit card loyalty program margins being closer to 25-35 percent, she said. 

Delta's unit revenue outlook for the second half of 2019 appears favorable, and the airline company is refocusing its growth to its higher-margin hubs later in 2019, the analyst said. 

Raymond James raised the EPS estimates for 2019 and 2020 by 11 percent to $6.70 and by 12 percent to $6.85, respectively.

Price Action

Delta Air Lines shares were rising 1.1 percent to $58.50 at the time of publication Thursday. 

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