Story Stocks^®

Delta Air Lines (DAL) provided a cautious outlook for the year ahead, leading the stock to lose some altitude following its 4Q25 earnings release. While the company edged past Q4 EPS and revenue expectations, bolstered by continuing momentum in its diversified revenue streams like premium seating and loyalty programs, its forward-looking guidance for 1Q26 and FY26 failed to reach the heights investors were seeking.

• Diverse, high-margin revenue streams (Premium, Loyalty, Cargo, and MRO) accounted for 60% of total revenue in Q4, reflecting a structural shift in DAL's business model.
• Premium ticket revenue jumped 9% yr/yr, while Loyalty travel revenue grew by 5%, underscoring the resilience of high-end consumer demand.
• International business showed solid improvement from Q3, with yr/yr unit growth improving by 5 points. The Transatlantic segment was a standout, with revenue up 4%.
• Adjusted total unit revenue (TRASM) was flat, a metric that may be viewed as a disappointment following the 0.3% increase recorded in the previous quarter.
• Guidance for 1Q26 and FY26 fell short of expectations at the midpoint. DAL projects 1Q26 EPS between $0.50–$0.90 and FY26 EPS of $6.50–$7.50.
• DAL also announced a new order with Boeing (BA) for up to 60 787-10 Dreamliners (30 firm, 30 options) to modernize its widebody fleet and support long-haul international growth.

Briefing.com Analyst Insight:

DAL delivered a respectable finish to 2025, but expectations were elevated following a 25% rally since late November. By issuing guidance that missed the midpoint of Street estimates, DAL has triggered a profit-taking event. The cautious EPS outlook likely reflects looming headwinds, including rising labor costs, which now represent nearly 28% of operating expenses, and persistent supply chain bottlenecks that limit capacity growth. Furthermore, the flat TRASM suggests that while the premium strategy is working, the broader pricing environment is stabilizing rather than accelerating. DAL’s conservative stance sets a sobering tone for upcoming reports from United Airlines (UAL), American Airlines (AAL), and Southwest Airlines (LUV). While the Boeing 787 order is a major long-term positive for fuel efficiency and international scale, it also signals a significant capital expenditure commitment. With expectations having run ahead of the fundamentals, we view this as a "show me" story for 1H26.