Stephens More Bullish On Delta After Guidance Update

Delta Air Lines, Inc. DAL reported Tuesday certain metrics for June that signals the "doom and gloom" thesis for the airliner is not accurate, according to Stephens.

The Analyst

Stephens' Jack Atkins resumed coverage of Delta with an Overweight rating and $70 price target.

The Thesis

Delta said Tuesday it expects second-quarter revenue per available seat mile (RASM) growth (excluding refinery sales) to be around 3.5%, which is near the high-end of management's guidance of 1.5% to 3.5%. Atkins said management highlighted ongoing solid passenger demand as it realized a monthly record of flying 18.9 million customers in June.

The company also expects its cost per available seat mile (CASM) ex. fuel to be flat to up 1%-2% year over-year in the second quarter, which is consistent with management's guidance.

Delta's encouraging performance in June should give investors confidence in its ability to sustain RASM momentum throughout 2019. Management is showing success in recent initiatives to drive revenue growth, including premium seating in international flights and improved flexibility for passengers to buy-up into premium seats on domestic flights.

Bottom line, Atkins said Delta is "very well positioned" to realize growth as it sees continued success in not only elevating but monetizing the customer experience.

Price Action

Shares of Delta were trading higher by 1% to $59.17 Wednesday.

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