Delta Air Lines (NYSE:DAL) struck a more cautious tone on its 2026 outlook while highlighting strong free cash flow, low leverage, and resilient demand from high-end travelers.
Bank of America Securities reiterated a bullish stance on Delta Air Lines after management discussions underscored the carrier's disciplined strategy, resilient demand profile, and strong cash-generation framework, reinforcing confidence in its long-term positioning despite a measured tone on guidance.
Analyst Andrew G. Didora reiterated a Buy rating and an $80 price target on Delta Air Lines following a post-earnings virtual meeting with CFO Dan Janki.
Didora highlighted Delta's emphasis on premium revenue, consistent cash generation, and low leverage. Its diversified revenue mix, particularly loyalty and MRO, continues to set it apart from peers, the analyst noted.
He maintained his 2026 EPS estimate of $7.30, citing management commentary that aligned with his long-term investment thesis.
Conservative Guidance Reflects Macroeconomic Uncertainty
Management struck a more cautious tone on near-term guidance, issuing a 2026 EPS range of $6.50–$7.50, below both Didora's forecast and the Street's roughly $7.30. The company pointed to macroeconomic uncertainty in 2025 as the primary driver of this conservatism.
Delta remains constructive on industry fundamentals. Management noted that consumers and businesses have adapted to volatility, while demand from higher-income travelers remains resilient. Didora pointed to 9% premium revenue growth in the fourth quarter and favorable industry capacity trends in early 2026.
MRO Business Repositioning and Growth Outlook
Didora also emphasized the growing contribution from Delta's MRO business, which had stalled near $800 million in revenue as the airline prioritized internal needs. A strategic repositioning has since expanded the backlog, including a 10-year contract with UPS.
Management now targets 20% MRO growth, with margins improving from roughly 9% in 2025 to the mid-teens over time. While quarterly results may be uneven, Didora expects a steady annual margin trajectory. On these assumptions, MRO operating profit could exceed $200 million by 2028, up from $76 million in 2025.
Free cash flow remains a key differentiator. Delta generated $4.6 billion in 2025 and expects $3–$4 billion in 2026, even after becoming a partial taxpayer. With disciplined capex and 20–30 aircraft retirements annually, Didora projects net leverage could fall to about 0.5x by 2028.
Didora reiterated his $80 price objective, based on roughly 6.0x 2026E EBITDAR, implying approximately 12% upside from the $71.34 share price as of January 16, 2026.
Morgan Stanley Also Backs Delta Despite Cautious Outlook
Recently, Morgan Stanley analyst Ravi Shanker reiterated an Overweight rating on Delta Air Lines with a $90 price target, despite conservative guidance, and expressed confidence. While fourth-quarter EPS beat expectations, Shanker noted that revenues slightly missed, and guidance midpoint fell short.
However, he believes management is intentionally cautious amid elevated headline risks. He highlighted strong underlying fundamentals, including $5 billion in pre-tax profit, record free cash flow, and robust early January demand.
DAL Price Action: Delta Air Lines shares were down 0.34% at $71.40 at the time of publication on Friday. The stock is trading near its 52-week high of $73.16, according to Benzinga Pro data.
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