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Delta Air Lines (DAL) shares opened down on Friday despite posting better-than-expected second-quarter (Q2) earnings.
The flagship air carrier reported $1.56 a share of earnings on $17.67 billion in revenue for its fiscal Q2, handily beating $1.48 a share and $17.53 billion that experts had forecast.
DAL’s price action this morning, therefore, resembles a classic “sell-the-news” event – especially since the airline stock is up nearly 25% year-to-date and is trading at record levels currently.
Still, Bernstein analyst David Vernon continues to see further upside in Delta Air Lines stock, and recommends ignoring the early trading dip as “noise” against exceptionally strong fundamentals.
Why Bernstein is bullish on Delta Air Lines stock
Vernon recommends sticking with DAL stock mostly because management issues strong guidance despite a highly volatile macro environment featuring regional conflicts and oil price volatility.
The airline expects its unit revenue to accelerate in Q3, and its earnings to beat consensus estimates by as much as 39% in the fourth quarter.
This signals Delta Air Lines’ commitment to margin preservation, and reassures investors that the company is positioned to protect its bottom line even through geopolitical disruptions.
Bernstein currently has an “Outperform” rating on Delta Air Lines, coupled with a $93 price target that signals potential for continued upside in the back half of this year.
DAL shares to benefit from premium cabin strategy
Vernon remains bullish on Delta Air Lines shares also because recent fare increases are closing the gap between ticket costs and Consumer Price Index (CPI).
In a post-earnings interview with CNBC today, he also emphasized that focusing solely on standard inflation metrics misses a larger, structural transformation.
DAL’s advanced “premium-cabin” segmentation strategy allows it to capture higher average fares from consumers willing to pay for superior amenities and convenience – a lucrative revenue stream that effectively subsidizes lower-tier tickets.
By maintaining this multi-tiered pricing architecture, Delta Air Lines Inc easily prices out low-cost competitors that operate on thin margins, driving overall industry unit revenues structurally higher while insulated from localized economic softening.
How to play Delta Air Lines at current levels?
All in all, David Vernon believes DAL shares’ long-term investment thesis remains firmly intact.
While the airline did benefit from 2026 FIFA World Cup demand in its recently concluded quarter, management believes higher fares are sustainable, which serves as a definitive sign of underlying demand.
Investors should also note that Delta Air Lines pays a dividend yield of nearly 1% currently, which makes it even more attractive as a long-term holding.
Crucially, Bernstein is actually among the more conservative Wall Street firms on Delta Air Lines.
The consensus rating on DAL sits at “Buy” currently, with the mean price target of $102 signaling potential for significant further upside over the next 12 months.
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