Morgan Stanley analyst Ravi Shanker reiterated an Overweight rating on the shares of Delta Air Lines Inc
DAL reported 2Q23 EPS of $2.68, which was above the consensus. Adjusted Operating Revenues were $14.613 billion, above the consensus.
The analyst said the company raising the guidance was not a huge surprise and thinks there may be more to come.
Overall, 2Q was DAL's best quarter ever. The analyst said that despite concerns around domestic unit revenues decelerating slightly y/y, management made clear that domestic demand remains robust.
Systems bookings beyond Labor Day are encouraging thus far and management noted they see strong demand for both Domestic and International.
Delta's recent corporate survey shows businesses expect to increase travel in the second half, with management noting that several of the least recovered sectors are also expressing optimism for additional travel in the Fall, commented the analyst.
The analyst believes the current long-term EPS target of $7 is likely achieved, barring any material macro/consumer weakness, and the next stop should be a $10 EPS target by 2025/26.
Despite the stock's nearly 50% YTD run-up, the analyst thinks it can still double based on the bull case in the next couple of years.
The analyst concluded that DAL's robust Fall commentary and steady Domestic pricing put cracks in any Domestic consumer bear case in the short term.
Price Action: DAL shares are trading lower by 2.96% at $46.20 on the last check Friday.
