Delta Air Lines Inc (NYSE:DAL) is expected to report second-quarter results slightly above the upper end of its previously guided earnings range, though investors are likely to focus more closely on the airline's outlook for the third quarter and full year, according to UBS.
The brokerage said it expects Delta to report second-quarter earnings slightly above the high end of its guidance range of $1 to $1.50 per share, in line with broader market expectations.
"Importantly, we think its forward outlook will be the key focus on the print," the analysts wrote.
For the third quarter, UBS said investors are generally expecting earnings guidance of $2 to $2.50 per share on mid-teens revenue growth. UBS forecasts third-quarter earnings of $2.51 per share, compared with Wall Street consensus of $2.03.
The analysts added that Delta is likely to take a conservative approach to its fuel assumptions for the third and fourth quarters given that oil prices have moved higher.
On costs, UBS said the market generally expects second-quarter non-fuel unit costs, or CASM excluding fuel, to increase more than 7% year over year. Delta had previously indicated that second-quarter CASM-ex growth would be broadly in line with the 6.3% increase recorded in the first quarter, but UBS believes crew scheduling issues were likely more severe than expected and may have increased cost pressures.
For the third quarter, the firm expects CASM-ex growth of 6% to 7%, with crew scheduling disruptions likely to persist but be less of a drag than in the second quarter.
UBS also noted that Delta's refinery operations are expected to contribute a benefit of about $0.10 to $0.15 per share in the third quarter at most, although profits could be lower following the recent fire at the company's Monroe refinery.
Looking ahead to fiscal 2026, UBS said investor expectations for Delta's full-year guidance vary following the stock's roughly 28% gain year to date. The brokerage believes the market is looking for earnings guidance in the range of $6 to $7 per share, compared with its own estimate of $6.70 and the Wall Street consensus of $5.99.
That compares with Delta's initial fiscal 2026 guidance of $6.50 to $7.50 per share issued in January.
UBS noted that achieving the lower end of that original range would imply fourth-quarter earnings of about $2.00 per share, assuming third-quarter earnings are around the midpoint of the expected $2 to $2.50 range.
The analysts cautioned that maintaining the original guidance range would require fourth quarter revenue growth to remain consistent with the third quarter despite tougher year-over-year comparisons and the possibility of weaker consumer demand.
"While its possible DAL guides to this range, we think one has to assume Q4 revenue growth remains consistent with 3Q despite tougher compares and possibility of greater consumer elasticity kicking in by then,” the analysts wrote.
“In our view, that's a bit optimistic, notwithstanding some modest benefit from greater portion of booking curve exposed to fare increases in Q4 versus Q3.”
UBS maintained its ‘Buy’ rating on Delta Air Lines with an unchanged price target of $107, implying upside from current levels of $87.