On Thursday, Deutsche Bank expressed increased confidence in Delta Air Lines' (NYSE:DAL) earnings potential, leading to a raised share price target. The target has been set to $60.00, up from the previous $50.00, while the firm continues to endorse a Buy rating on the stock.
The optimism from Deutsche Bank comes after a review of Delta's performance in the March quarter and the airline's projections for the June quarter. The analyst's assertion is that these factors bolster the belief in Delta's capability to achieve the upper end of its projected earnings per share (EPS) for 2024. Consequently, the analyst has reiterated the forecast of a full-year EPS of $7.00, which stands above the Bloomberg mean consensus EPS of $6.46.
The new price target of $60 is based on a valuation approach that applies approximately 5 times the enterprise value to EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) ratio to Delta's EBITDAR estimates for the years 2024 and 2025. This valuation metric is within the airline's historical trading range, which typically spans from 5 to 7 times EV/EBITDAR.
The analyst further elaborates that the $60 price target implies a price-to-earnings (P/E) ratio of around 8.5 times the 2024 EPS estimate and approximately 8 times the estimate for 2025. This is considered modest compared to the historical mid-cycle trading range of 10 to 12 times for legacy carriers. The assessment reflects a favorable view of Delta's valuation, given its solid earnings track record over the past two years and its forward-looking financial outlook.
InvestingPro Insights
Deutsche Bank's upgraded price target for Delta Air Lines (NYSE:DAL) underscores the airline's robust financial performance and promising outlook. Complementing this perspective, InvestingPro data reveals a compelling picture of Delta's market position. With a market capitalization of $29.55 billion and an attractive P/E ratio of 6.08, the company stands out for its financial stability. The P/E ratio has adjusted slightly higher over the last twelve months as of Q4 2023 to 6.85, still indicating a potentially undervalued stock when compared to industry averages.
Delta's revenue growth has been solid, with a 14.76% increase over the last twelve months as of Q4 2023, and a gross profit margin of 22.4%, demonstrating the company's efficiency in generating income relative to its revenue. The airline's operational strength is further evidenced by an operating income margin of 10.49% during the same period.
Considering these metrics, InvestingPro Tips highlight Delta's high shareholder yield and its status as a prominent player in the Passenger Airlines industry. While six analysts have revised their earnings downwards for the upcoming period, the company is still expected to be profitable this year and has been profitable over the last twelve months. Additionally, Delta has experienced a large price uptick over the last six months, with a 30.97% return, showcasing investor confidence in its trajectory.
For readers looking to delve deeper into Delta Air Lines' financials and gain access to more insights, InvestingPro offers additional tips and metrics. Use coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the 7 additional tips available on InvestingPro that can further inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.