Delta's profit forecast cut leads to tumble in airline stocks

Delta Air Lines shares saw a decline of approximately 8% on Friday following the company's decision to lower its earnings forecast for 2024. The airline now expects full-year earnings per share to be between $6 and $7, which is lower than its previous estimate of over $7 per share. This revision in earnings forecast impacted other major airlines as well, including United, American, and Southwest, which all experienced a decrease in stock value. United and American saw a decrease of about 9% each, while Southwest fell over 4%.

Despite the revision in earnings forecast, Delta ended 2023 on a positive note, with its quarterly profit doubling and net income reaching $2.04 billion in the fourth quarter. Delta CEO Ed Bastian expressed confidence in the airline's recovery, stating that it has regained almost 90% of its pre-pandemic travel demand. Bastian also anticipates strong growth in international travel as Americans show interest in overseas destinations.

Looking ahead, Bastian expects a turning point in domestic unit revenues during the early part of this year. Delta had a successful 2023 with its shares surging more than 20%, although they are still below their all-time high of $63.16 in July 2019. As of Friday, Delta's stock was trading around $39 per share.

While the revised earnings forecast may have impacted Delta's stock performance, it is important to note that the airline industry as a whole has faced significant challenges due to the Covid-19 pandemic. The recovery process has been gradual, but Delta's CEO remains optimistic about the future.

Investors and analysts will continue to monitor Delta's performance closely, particularly as travel demand evolves and the industry adapts to changing circumstances. As always, it is advisable to consider a range of perspectives and expert opinions when making investment decisions.


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