We are upgrading our recommendation to Outperform from Neutral on Delta Air Lines (DAL). The company’s first quarter earnings missed the Zacks Consensus Estimate, but losses narrowed from the year-ago quarter on account of improved economic conditions and lower fuel expense.
We expect the economy and revenue trends to improve over the course of the year as business travel continues to return, capacity discipline is maintained and synergies from the merger with Northwest Airlines are fully realized. The company will continue to focus on cost discipline and cash flow generation to further strengthen and de-leverage the balance sheet.
Further, we expect Delta Air Lines to pay down substantial debts and reduce capital expenditure on new aircraft to improve the balance sheet in the future.Zacks Investment Research
