Delta Air Lines Inc (NYSE:DAL) reaffirmed its full-year earnings outlook despite higher fuel costs, a move Bank of America said underscores the carrier's earnings resilience and supports its valuation following stronger-than-expected second quarter results.
Bank of America maintained its ‘Buy’ rating on Delta after the airline reported second-quarter earnings per share above consensus, with the beat driven by lower-than-expected costs while revenue was broadly in line with expectations.
The analysts wrote that Delta's decision to reaffirm its 2026 earnings guidance, first issued in January, was a key takeaway from the report.
"We believe the reiteration of the full year is important and shows the resiliency of DAL's earnings algo regardless of the macro," Bank of America wrote, noting the company maintained its forecast despite absorbing roughly $3.5 billion in higher fuel costs than the firm had originally estimated.
Delta's third quarter earnings guidance of $2 to $2.50 per share was broadly in line with the firm's expectations. Bank of America said the outlook implies mid-teens revenue growth alongside improving unit costs.
The firm noted that investors remain focused on the revenue assumptions implied by Delta's reaffirmed full-year guidance. It said the earnings outlook suggests fourth-quarter revenue growth comparable to the third quarter, even as industry capacity is expected to increase and year-over-year comparisons become more challenging.
Bank of America noted that Delta expressed confidence in maintaining pricing into the fourth quarter, citing an improving mix of corporate travel, continued industry capacity discipline, international booking trends and encouraging fall booking patterns.
On costs, the analysts wrote that unit cost inflation should moderate after rising 6.8% in the second quarter, helped by increasing capacity and easing operational pressures. It added that 2027 could see a return to Delta's longer-term target of low-single-digit unit cost growth as capacity normalizes.
Looking across the sector, Bank of America believes that Delta's results reinforce its positive outlook for airline earnings but may temper expectations for upside from other carriers. The firm said it still expects sequential improvements in unit revenue at airlines including United Airlines due to easier comparisons and slower capacity growth, although higher fuel costs could make it more difficult for some peers to reaffirm full-year earnings guidance as Delta has.
Despite Delta's recent share price re-rating, Bank of America said the stock's valuation could continue to improve, supported by what it described as consistent earnings generation and strong free cash flow through periods of weaker demand and higher fuel prices.
Shares of Delta have added about 24% so far this year, trading hands at about $86 on Monday afternoon.