Delta Airlines to Report Loss in 2021, Unless There is Significant Recovery in Traffic: Cowen
Cowen and company in their latest report said they continue to believe that Delta Airlines will report a loss this year unless there is a significant recovery of international and corporate traffic in the second half, which seems highly unlikely amid the fourth wave of coronavirus infections.
The Airline company which provides scheduled air transportation for passengers and cargo throughout the United States and across the world is expected to report its first-quarter earnings on Thursday, April 15.
Delta Airlines would report a loss for the fifth consecutive time of $2.84 in the first quarter of 2021 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions. That would represent a year-over-year decline of over 450% from -$0.51 per share seen in the same quarter a year ago.
The Atlanta-based airline’s revenue would decline more than 50% to around $3.9 billion.
In 2020, Delta Airlines reported a full-year loss for the first time in 11 years as COVID-19 travel restrictions significantly dented air travel demand, but CEO Ed Bastian said he expects 2021 to be the year of recovery.
Delta Airlines’ shares, which slumped more than 40% last year, rose about 22% to $49.27 on Friday.
“We are reiterating our Market Perform rating on the common shares of Delta Air Lines. We are increasing our price target to $53 from $44, which is based on 8.2x 2023E EPS. These shares are currently selling at ~8.2x the 2023 consensus EPS estimate, a discount to peers with higher exposure to domestic leisure traffic and a slight premium to its own historical trading range. The shares are ~20% below their pre-pandemic highs, but 2021 revenues are forecast to be ~42% below 2019 levels suggesting these shares may take a break before heading higher,” noted Helane Becker, Cowen and Company.
“We do not expect revenues to get back to 2019 levels until 2023 at the earliest. Exposure to corporate and international travel will continue to weigh on near-term results. Jet fuel pricing has recovered faster than anticipated, weighing on bottom-line forecasts in the near-term vs previous estimates. We continue to expect Delta will not recover revenue to pre-pandemic levels before 2023, unless corporate and international traffic recovers sooner than anticipated.”
Delta Airlines Stock Price Forecast
Seventeen analysts who offered stock ratings for Delta Airlines in the last three months forecast the average price in 12 months of $53.94 with a high forecast of $72.00 and a low forecast of $42.00.
The average price target represents a 9.48% increase from the last price of $49.27. Of those 17 analysts, ten rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.
Morgan Stanley gave the base target price of $72 with a high of $96 under a bull scenario and $35 under the worst-case scenario. The firm gave an “Overweight” rating on the airlines’ stock.
“We remain Overweight Delta Airlines (DAL) and are raising our price target from $55 to $72. DAL remains our top Legacy airline pick. We believe DAL’s strong franchise/customer loyalty and historical margin superiority can continue on the other side of the pandemic. On the other hand, DAL cannot wave away Legacy challenges, including delayed corporate/international travel and increased pressure on the balance sheet,”
“Nevertheless, we believe DAL is well positioned for the recovery as we see it – our estimates are 39% above consensus for FY22 and 49% for FY23. Our DCF-backed PT of $72 is about 20% above where the stock was trading in 2018-19 with a 2023 estimated EPS about 20% higher than 2019 as well.”
Several other analysts have also updated their stock outlook. Evercore ISI raised their price objective to $55 from $51 and gave the stock an overweight rating. Jefferies Financial Group raised their price objective to $50 from $40 and gave the stock a hold rating. Susquehanna Bancshares cut shares of Delta Air Lines from a positive rating to a neutral rating and raised their price objective to $45 from $42.
Check out FX Empire’s earnings calendar