Delta Air Lines Stock Could Fly to New Highs in 2025
2025.01.14 03:51
Delta Air Lines (NYSE:) can fly to new highs in 2025 because the company continues to grow, cash flow is improving, the balance sheet strengthens, and capital returns are flowing. The takeaway from the Q4 report is that business remains strong on all fronts, costs are controlled, and results are better than expected, including better-than-forecast guidance.
The outlook for 2025 is for revenue to sustain a high-single-digit growth pace, and it may be cautious because of momentum in the travel industry. Business and consumer trends are positive, and there is potential for economic tailwinds to develop. Although the outlook for Fed rate cuts is diminished, the cause is government policy; Trump’s policies are expected to drive demand at all system levels.
Delta Air Lines: Record Results and Industry-Leading Performance Drives Value
Delta Air Lines had a strong Q4, producing a record quarterly result, sealing the deal on a record year, and producing industry-leading operational quality. Total revenue came in at $15.56 billion, up nearly 9.5% year over year and 750 basis points above the analysts’ consensus reported by MarketBeat. Revenue performance is due to strength in leisure and corporate markets, led by premium and loyalty spending, which accounted for 57% of the full-year take. Cargo is also substantial, up more than 30%, with demand in all segments expected to remain strong in F2025.
Earnings quality is also good. The company improved its total revenue per available seat mile by 40 bps, driving a GAAP operating margin of 11% and an adjusted 12%. The critical takeaways include record quarterly pre-tax earnings, up roughly 30%, an operating cash flow of $1.8 billion, and a full-year free cash flow of $3.4 billion. On the bottom line, revenue leverage and cost controls resulted in $1.85 in adjusted earnings, $0.11 or 600 bps better than analysts’ forecast and up 45% year over year.
Another factor in why Delta Air Lines will hit new highs in 2025 is guidance. The company forecasts Q1 revenue growth in the range of 7% to 9%, ahead of consensus, with an EPS midpoint of $0.85 versus the $0.77 forecast by analysts. Regarding the full year, Delta expects EPS growth above 10% versus a 10% consensus, free cash flow at the high end of forecasts, debt reduction, and year-ending leverage of less than 2x.
Delta’s Balance Sheet and Capital Return Outlook Provide Lift for Share Price
Delta’s balance sheet and capital return outlook are central to the stock price outlook. The Q4 results include another $1.5 billion in debt reduction, total debt down 8.5% sequentially and nearly 20% year-over-year, with additional reduction expected during the year. The reduction bolsters the company’s credit-quality debt rating and improves free cash flow and the capital return outlook.
Delta hasn’t restarted share buybacks yet but is on track to do so in 2025, in addition to dividend distribution increases. The company increased by a nickel per quarter or 50% in 2024 and could easily maintain the same percentage gain in 2025. Ultimately, Delta is expected to return its distribution to the pre-COVID levels and grow from there. An increase to the $1.00 quarterly payments issued in 2019 is a 165% increase from the F2024 levels.
Delta analysts’ trends in 2024 were positive, and the trend continues in 2025, providing additional lift to the market. The trend includes increasing coverage, firming sentiment, and upward price target revisions that lifted the consensus by 40% in 12 months. The consensus estimate suggests this stock will rise by 15% from critical levels to a new all-time high of $77 this year, and revisions suggest an even higher price point will be reached. The first two revisions tracked by MarketBeat following the FQ4 results include two price target increases to $75 and $78, aligning with that outlook. The high price target of $90 was set by UBS in November, implying a 35% upside this year.
Delta Air Lines Rockets Higher; Technical Outlook Aligns with Forecasts
Delta Air Lines crossed a significant trigger point in 2024 and confirmed its bullish signal in 2025. The trigger point was crossing the previous all-time high; the confirmation in 2025 includes a pullback to test for support that was confirmed at a higher level. Support is now at the $60 level, with Delta’s stock price tracking for new highs. The 2025 price action includes a break to new highs that suggest a continuation of 2024’s price trends. In this scenario, the market can rise into the mid-$80 range to align with the analysts’ consensus forecast. 
Original Post
