Delta and Conagra Earnings: A Litmus Test for Consumer Resilience and Trade Headwinds

The upcoming earnings reports from Delta Air Lines (DAL) and Conagra Brands (CAG) on July 10, 2025, will serve as critical indicators of how consumers and businesses are navigating a complex economic landscape. With trade policy uncertainties, inflationary pressures, and shifting spending habits at play, these results could provide clues about sector rotations, Fed policy expectations, and whether dips in consumer discretionary and transportation stocks are worth buying—or if caution is warranted.

Delta Air Lines: A Test of Travel Resilience Amid Regional Disparities

Delta's Q2 2025 earnings are expected to report an EPS of $1.97, a 16.5% year-over-year decline, but Zacks' Earnings Surprise Potential (ESP) model hints at a 70% chance of a positive beat. This optimism stems from Delta's ability to outperform expectations in two of the past four quarters, including a 15% Q1 2025 beat. However, the story is uneven:

• Regional divides: Revenue growth in the Pacific (+9.4%) and Latin America (+4.4%) contrasts sharply with a 5.7% decline in the Atlantic region due to capacity cuts and geopolitical tensions. This divergence could signal broader trade policy risks, especially as U.S.-EU tensions over subsidies linger.
• Cost discipline: Delta's CASM (excluding fuel) fell 5.7% YoY in Q1, a trend that could offset revenue headwinds. Yet rising fuel prices and potential recession-driven business travel cuts pose risks.
• Dividend resilience: A 3.5% yield and a forward P/E of .3 make Delta a defensive play, but its Zacks Rank of #3 (Hold) reflects uncertainty about macro trends.

Implications for investors: A beat could validate the durability of leisure travel demand, while a miss might amplify fears of a broader economic slowdown. The results will also clarify whether Delta's cost controls can counteract margin pressures from fuel and labor—key metrics for sector rotations in transportation.

Conagra Brands: Cost Pressures and Consumer Trade-offs

Conagra's Q2 results narrowly beat estimates, but its lowered fiscal 2025 guidance ($2.45–2.50 EPS vs. prior $2.60–2.65) underscores the challenges facing packaged goods. The company's results reflect two critical trends:

1. Value-driven demand: Gains in microwave popcorn, shelf-stable dinners, and frozen meals highlight a shift toward affordable, convenient staples. This aligns with CPI data showing rising grocery prices (+5.5% YoY in May 2025), forcing households to prioritize cost-effective options.
2. Input cost inflation: Protein and sweetener costs surged, squeezing margins despite productivity gains. Conagra's adjusted gross margin fell 52 bps to 26.4%, and SG&A rose due to restructuring charges. These pressures are unlikely to abate soon, with inflation projected at 4% for fiscal 2025.

Trade policy risks: Conagra's International segment slumped 12.9% YoY due to currency headwinds and lost M&A contributions. With July 9 tariffs on Chinese goods looming, input cost volatility could persist, especially in commodities like soybeans and sugar.

Broader Market Signals: Sector Rotations and Fed Policy Clues

Together, these earnings offer a snapshot of two key economic fault lines:
- Consumer spending bifurcation: Delta's leisure travel strength vs. Conagra's pantry staple demand suggest households are prioritizing experiences over discretionary goods but remain cost-conscious on essentials.
- Inflation and Fed policy: If Delta's results reflect manageable fuel costs and Conagra's margins stabilize, it could signal inflation is cooling—potentially easing Fed rate hike concerns. Conversely, worsening margin trends might pressure the Fed to stay hawkish.

Investment takeaways:
- Delta: A beat could justify a dip-buy in transportation stocks, but investors should monitor management's outlook on business travel and Atlantic region recovery.
- Conagra: The stock's Zacks Rank of #5 (Strong Sell) and negative ESP (-1.37%) suggest caution unless input costs ease. However, its dividend (yield: 3.7%) and free cash flow resilience make it a “wait for a better entry” candidate.

Final Analysis: Proceed with Caution, but Stay Selective

Both companies face macro headwinds, but their earnings could redefine sector sentiment:
- Transportation: A Delta beat might reignite interest in airlines, especially if leisure demand holds. Monitor to gauge margin sustainability.
- Consumer staples: Conagra's struggles highlight sector-wide inflation risks, but its Q2 market share gains suggest defensive plays like pantry staples could outperform if recession fears grow.

Historically, when these companies beat earnings estimates by at least 5%, the buy-and-hold strategy delivered an average return of 25.5% over 20 days—though with significant volatility, including a 31.5% maximum drawdown. This underscores the importance of selective investing: while the potential rewards are compelling, investors must balance Delta's cost discipline and Conagra's value-driven demand against the risks of rising input costs and trade tensions. The July 10 earnings reports won't just be about two companies—they'll be a referendum on whether the U.S. economy can sustain its fragile recovery.