On Tuesday, Citi analysts adjusted their outlook on Delta Air Lines (NYSE:DAL) shares, raising the price target to $80 from the previous $77, while reiterating a Buy rating on the stock. The new target reflects a series of forecast adjustments for the airline, which include expectations for higher revenue per available seat mile (RASM), long-term projections of slightly lower fuel prices, increased taxation, a minor rise in share count, and the incorporation of fourth-quarter 2024 results into their financial model.
The updated estimates from Citi suggest a shift in earnings per share (EPS) for Delta Air Lines from the earlier projection of $7.33 in the current year and $8.74 in the following year to a new forecast of $7.49 and $8.72, respectively. These changes are based on various operational and financial factors that are expected to influence the airline's performance.
According to the Citi analyst, the application of a 10.5x target multiple to the modestly higher estimated EPS for 2025 has led to the increase in the stock's price target. This adjustment reflects a positive outlook on the company's future earnings potential, despite the factoring in of higher taxes and an increase in the number of shares.
The analyst's commentary provides insight into the rationale behind the price target adjustment, stating, "Forecast adjustments for Buy-rated Delta Air Lines, include the incorporation of (A) higher expected revenue per available seat mile or RASM, (B) slightly lower, expected (long-term) fuel prices, (C) higher taxation, (D) a slightly increased share count and (E) 4Q™24 results into our model."
With this revised price target, Citi analysts appear to maintain confidence in Delta Air Lines' ability to navigate through the various financial and operational challenges, while still offering potential growth for investors. The airline's stock price adjustment reflects the nuanced balance of these factors as assessed by Citi's financial analysis.
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