Delta Air Lines (NYSE: DAL) is expected to reach new highs in 2025, as concerns inspired by tariffs and geopolitical tensions have proven overblown.
The company’s Q2 results and guidance affirm that the strengths present in 2024 and Q1 2025 remain, providing solid cash flow and the ability to improve shareholder value this year, next, and over time.
With a solid financial foundation and renewed investor confidence, Delta stock presents a compelling buy opportunity for the second half of 2025.
Delta's Q2 Results Reinforce Growth Trajectory
Highlights from the Q2 report include record-setting quarterly adjusted revenue, outperformance on earnings, solid margin results, balance sheet improvement, and favorable guidance suggesting that momentum will continue through year-end.
Among the most notable developments in Q2 was the company’s cash flow performance. Delta generated $2 billion in free cash flow in the first half of the year, putting it on pace to achieve its full-year target of $3 to $4 billion. Based on current trends, it is likely the company will end the year at the higher end of that range. This cash flow strength also enabled Delta to reduce its adjusted net debt significantly, bringing the year-to-date total down $1.7 billion, a 10% decrease in just two quarters, and increase its dividend substantially.
Delta Air Lines' Strong Quarter Lays Fears to Rest
The dividend increase is worth 25% to investors, bringing the annualized payout to nearly $1.00.
The payout is reliable in 2025, running at roughly 10% of earnings, and is expected to continue growing at a robust pace over the next two to three years.
Regarding shareholder value, Q2 business activities resulted in an improved cash position, increased current assets and total assets, reduced liabilities, and a nearly 15% increase in equity.
Delta Air Lines’ Q2 was solid, with operating revenue up due to growth in all major reporting segments, led by higher-margin revenue streams. The company’s reported revenue fell slightly compared to last year but rose by a low-single-digit pace at the operating level, setting a quarterly record. High-margin premium revenue grew by 5%, outpacing the main cabin, while loyalty revenue increased by 8%, international revenue by 2%, and corporate revenue by a low single-digit amount.
The margin news is also good for this transportation stock. The company experienced a slight decline in total revenue per available seat mile (TRASM), but this was offset by decreased fuel costs and improved cost performance, in line with forecasts. The net result is an operating margin of 12.6%, 13.2% adjusted, down 100 and 130 basis points YOY, respectively, but as expected and sufficient to generate ample cash flow and outperformance on the bottom line. The adjusted $2.10 is down compared to the prior year, but a nickel ahead of MarketBeat’s consensus and the strengths are expected to carry into Q3 and Q4.
The guidance is the driving force for Delta Air Lines' stock price action. The company pulled guidance earlier in the year, leading analysts to reduce their estimates, but reinstated it with the Q2 release. The reaffirmed outlook is not only strong, expecting YOY growth, but is also well-above the consensus estimates and leading to significantly improved market sentiment.
Delta Air Lines Set to Soar in Back Half
The price action in Delta stock was bullish following the release, rising more than 10% in premarket trading to clear a critical resistance hurdle. The move affirms the rebound that began in April, setting the market up to continue rising in Q3. It also aligns with the analyst's sentiment, which, although diminished from earlier in the year, predicted a 20% upside leading into the Q2 report and will likely improve as Q3 progresses. Institutional trends also align with a rising DAL stock price. They own more than 60% of the stock, provide a solid support base, and have been buying on balance in 2025.
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The article "Delta Air Lines Could Reach New Highs in 2025—And Here’s Why" first appeared on MarketBeat.
