Deutsche Bank Maintains "Buy" Rating On Delta Air Lines, Lifts Estimates
Thursday, December 15, 2021 2:46 PM

Deutsche Bank (DB) maintained its "Buy" rating on Delta Air Lines Inc. (NYSE:DAL) with a price target of $16.00, while lifting earnings estimates for the company.

"Despite a year of many challenges, Delta is on track to produce a $1.1 billion net profit (which includes a Dec Q net profit of $287 million), $1.5 billion of free cash flow, and an 8.8% return on invested capital. Those anticipated results and the fact that company fully recovered the run-up in fuel prices during 2011 are an indication that Delta (and much of the industry) may have entered a new era – i.e. one that is driven by profit maximization," DB analyst Michael Linenberg said in a note.

Linenberg raised his December quarter EPS estimates for the company to 34 cents from 24 cents, versus consenus of 28 cents, on the back of better-than-expected revenue trends. Linenberg also moved up 2011 EPS estimate to $1.30 from $1.20.

At year end 2011, Delta is projected to have $12.9 billion of net debt, $4.1 billion less than two years ago, and on a trajectory that should allow the airline to achieve its $10 billion net debt target by 2013.

"The reduction in debt will not only reduce Delta’s interest expense, but we believe it will mitigate its operating leverage which should ultimately improve its stock valuation via an inherently lower equity risk premium," Linenberg said. "This process is a multi-year one, but one that has the potential of transforming Delta’s equity into investable security."

On Thursday, DAL is trading 7.73 percent higher at $8.78. The stock has been trading in the 52-week range between $6.41 and $13.21.