Get the best value with Delta Air Lines stock

Delta Air Lines (NYSE:DAL) stock may have been on the rise lately, but that doesn’t mean it’s expensive. After taking a closer look at the company’s valuation and its just-released quarterly results, bargain hunters can be sure to buy a few shares.

You may not have noticed, but airfare hasn’t been cheap lately. With inflationary pressures potentially dampening aviation activity, investors may be wondering whether travel demand and, consequently, Delta’s profits will have gained ground in the first quarter.

As a result, Delta maintained a profitable quarter and even surpassed Wall Street expectations. So if you don’t mind being a passenger on a potentially turbulent flight, DAL stock could be your ticket to high long-term returns.

Delta CEO sees “very healthy” demand.

One of the job descriptions of a CEO is to be a hype man. Nonetheless, Delta Air Lines CEO Ed Bastian sounded optimistic in an interview with Yahoo! Finance needs to strengthen the confidence of reluctant investors.

“We’ve seen really strong demand,” Bastian assured investors. “Clearly, the 2020 travel demand downturn due to COVID-19 is now far in the rearview mirror.”

To back up his confident stance, the Delta CEO provided some surprising statistics.

“This momentum has continued internationally. It continues in Korea as well… To date, we have had 11 of the highest sales days in the company’s history. “This is a strong predictor that the spring and summer seasons will be quite healthy in terms of travel.”

This is good news not only for the company and its shareholders, but also for its customers. If Delta can maintain strong flight load factors, it may not need to raise airfares.

Bastian seemed to hint at this when he said, “We expect to have a much higher level of capacity this summer than last summer, and we expect the overall price level to remain roughly the same.”

Bastian’s reassuring tone will not calm financial markets today, as the Bureau of Labor Statistics (BLS) reported a higher-than-expected annual consumer price index (CPI) growth rate of 3.5% in March. Nonetheless, while most markets started in the red, DAL stock was solidly in the green.

Even if Delta Air Lines stock rises today, there are still deals available. As of the last 12 months, Delta’s GAAP-measured price-to-earnings (P/E) ratio is just 6.6, as opposed to the sector-median P/E ratio of around 25.

Also, keep in mind that DAL stock still hasn’t re-examined its pre-pandemic highs of around $60. So, with the stock price currently approaching $50, there should still be room for the stock to run this year.

Aiming to “continue strong momentum”

Bastian expects “continued strong momentum” for Delta Air Lines, but that means the airline is already in a state of forward momentum. But the numbers actually back this up.

For the quarter that ended in March, Delta reported operating revenue of $12.6 billion, up 6% from a year ago and ahead of analysts’ consensus estimate of $12.5 billion. Additionally, these results set a March quarter record for Delta.

Interestingly, Delta’s quarterly travel rewards revenue increased 14% year-over-year to $844 million. So it appears that the airline’s loyalty incentives are having the desired effect.

Another interesting note: Delta’s quarterly managed enterprise revenue grew 14% year-over-year, “driven by the return of large corporate accounts.” Will this trend continue this quarter and beyond?

Delta is optimistic, saying, “Recent corporate survey results show 90% of companies expect travel volume to increase or remain the same beyond the June quarter.”

For full year 2024, Delta reiterated earnings guidance of $6 to $7 per share. You might have expected that the company’s prospects would be boosted by its strong March quarter results.

Perhaps Delta’s management is concerned about recent fuel price increases. In the past week alone, the global average price of jet fuel has surged 4.3%. As a result, it may be prudent for Delta to overhaul its annual revenue guidance.

With all of the foregoing in mind, prospective investors will want to weigh Bastian’s supreme confidence against Delta’s more moderate earnings outlook. But no matter how you slice it, Delta Air Lines’ rock-bottom valuation makes it hard to resist buying the stock.

disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.