Delta Air Lines Stock Moves Higher After Strong Earnings Report
Delta Air Lines reported adjusted operating revenue of $8.4 billion and adjusted earnings of $0.22 per share, beating analyst estimates on both earnings and revenue.
The company’s CEO Ed Bastian revealed Delta Air Lines’ view on the impact of the new wave of coronavirus: “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel”.
Delta Air Lines expects that its Q1 2022 total revenue would be 72% – 76% of its Q1 2019 revenue due to the negative impact of Omicron. However, it looks that traders are ready to bet that Omicron is a temporary problem and that pent-up demand will lead to a very strong second half of 2022.
What’s Next For Delta Air Lines Stock?
Delta Air Lines stock managed to gain ground at the start of this year despite worries over the spread of Omicron. The market believes that the new variant of coronavirus will not deal significant damage to the economy, so traders are mostly focused on Fed policy.
However, it should be noted that analyst estimates for Delta Air Lines’ 2022 earnings have been trending lower in recent weeks. Currently, the company is expected to report a profit of $2.9 per share in 2022, so the stock is trading at less than 15 forward P/E. Such valuation levels do not look too expensive as Delta Air Lines will likely have a great opportunity to improve its financial performance in 2023.
Most likely, the near-term direction of the stock will depend on market’s view on Omicron. In case the market remains confident that Omicron is not a big problem despite the significant number of new cases, Delta Air Lines stock will have a good chance to develop additional upside momentum.
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