Delta Air Lines Faces Turbulence Amid Global Economic Headwinds

Delta Air Lines has declined 11% YTD due to global economic headwinds and tariff news impacting business and discretionary travel. Despite its recent struggles, the airline's stock may still be overvalued given the turbulent times.

Delta Air Lines, Inc. (NYSE:DAL) has seen its stock decline by 11% year-to-date (YTD) due to global economic headwinds and tariff news impacting business and discretionary travel. Despite its recent struggles, the airline's stock may still be overvalued given the turbulent times.

The company's most recent earnings report, released on July 10, 2025, showed that top-line growth is non-existent, and margins are contracting. While quarterly guidance suggests improvement in the coming quarter, annual guidance shows that earnings per share (EPS) declines are expected to accelerate from 2024 levels. The forward price-to-earnings (P/E) ratio, which is historically elevated, indicates potential overvaluation [1].

Delta's operations show a commitment to growth. In the first half of 2025, the airline took delivery of 19 aircraft while retiring 14. They also announced plans to build a global partnership with IndiGo, Air France-KLM, and Virgin Atlantic, aiming to connect India, Europe, and North America. Additionally, they launched new nonstop flights from Salt Lake City to Seoul-Incheon, enhancing their gateway between the U.S. and Asia [1].

However, financial performance has been sluggish. Total operating revenues were $16.648 billion, unchanged from the prior year. While the cargo business grew by 7%, the passenger business saw virtually no change in revenues year-over-year (YoY). Despite beating consensus expectations by $489.54 million, the company's operating margin contracted by 1.5 percentage points to 13.2% [1].

Delta's adjusted EPS for the June quarter was $2.10, representing a decline of 11.02% YoY. This was better than feared but still concerning. Operating cash flows declined by 25% YoY to $1.844 billion, and accounts receivable increased by 16.47%, contributing to this cash flow decline. Adjusted free cash flow (FCF) dropped by 42% YoY, indicating significant weakness [1].

The company provided both annual and quarterly guidance. For 2025, they are expecting an adjusted EPS range of $5.25 to $6.25, representing a decline of 6.66% from 2024 levels. For the September quarter, they expect total revenue growth of between 0% and 4%, with an operating margin range of 9% to 11% and an adjusted EPS range of $1.25 to $1.75 [1].

Despite the challenges, the forward P/E ratio has rebounded to levels seen in the second half of 2024, suggesting that the stock may be overvalued relative to the outlook. Given the uncertain macro environment, investors should approach Delta with caution [1].

References:
[1] https://seekingalpha.com/article/4812009-delta-air-lines-could-be-overvalued-in-turbulent-times
[2] https://www.investing.com/news/swot-analysis/frontier-group-holdings-swot-analysis-airline-stock-faces-turbulence-amid-merger-talks-93CH-4179671