Delta Air Lines (DAL) is set to report its Q4 earnings before the market opens on Friday, following a strong holiday travel season that buoyed airline industry performance. Analysts expect DAL to post EPS of $1.76 and revenue of $14.2 billion, according to FactSet consensus estimates. These results would reflect robust travel demand, as seen in updates from peers such as American Airlines and Southwest Airlines earlier in December.

DAL reaffirmed its Q4 guidance at its November Investor Day, projecting EPS in the range of $1.60-$1.85 and revenue growth of 2-4%, supported by improving unit revenue trends and rationalized supply growth. Investors will also be keenly watching for DAL's forward guidance for Q1 and FY25, with EPS projections of $0.77 and $7.43, respectively, expected to set the tone for the year.

Primary issues facing DAL include rising costs, particularly higher wages for pilots and staff, and the industry-wide challenge of managing supply and demand imbalances. A key metric to watch in the earnings report is total revenue per available seat mile (TRASM), which declined by 3.6% year-over-year in Q3 but showed signs of improvement in September. DAL's focus on premium offerings, which carry higher margins, is a bright spot, with management planning to increase the share of premium seating in its fleet.

Additionally, analysts will assess DAL's updated guidance for non-fuel cost per available seat mile (CASM) in FY25, which is expected to increase by low-single-digits, raising questions about cost discipline. Overall, while operational challenges persist, DAL’s emphasis on premium growth, disciplined capacity management, and its long-term financial targets position it as a strong player in the airline industry for 2025 and beyond.

Delta Air Lines provided an optimistic mid-quarter update at its November 20 Investor Day, reaffirming its Q4 guidance and unveiling a bullish long-term outlook for 2025-2027. The company maintained its Q4 EPS guidance of $1.60-$1.85 and revenue growth of 2-4%, noting improving unit revenue trends and supply rationalization in the broader airline industry. Delta outlined its ambitious financial targets, including mid-single-digit revenue growth, mid-teen operating margins, and $3-$5 billion in annual free cash flow by 2025. This framework aims to drive an average annual EPS growth of 10%, with capacity expected to grow 3-4% year-over-year. Analysts noted that Delta is well-positioned to capitalize on industry tailwinds and its strategic initiatives, particularly its focus on premium seating expansion and capacity discipline.

A key highlight of the update was Delta’s emphasis on premium seat offerings, which saw 4% revenue growth in Q3 compared to a 5% decline in main cabin ticket revenue. The airline plans to expand premium seating across its fleet, targeting millennial travelers willing to pay for luxury travel. Premium seats currently offer margins 15 percentage points higher than main cabin seats, and Delta expects premium to account for the majority of its seating by 2027.

While the company faces ongoing cost pressures, including rising wages and modest non-fuel CASM increases, its focus on margin expansion and improved earnings visibility underpins analysts’ positive outlooks.

Analysts at Evercore raised Delta’s price target from $65 to $80, citing its strong profitability recovery, superior cost structure, and durable free cash flow. Although Delta did not raise its Q4 guidance, the strategic roadmap sets a solid foundation for sustained growth, bolstering investor confidence heading into its Q4 earnings report.

Delta Air Lines reported mixed Q3 earnings, with adjusted EPS of $1.50 missing estimates of $1.52 and declining from $2.03 a year ago. Revenue was slightly below expectations at $14.59 billion, as a $380 million headwind from a CrowdStrike (CRWD) outage in July weighed on results, contributing to customer refunds and increased crew costs. The outage also pushed adjusted non-fuel CASM up by 5.7% year-over-year, slightly above Delta's prior guidance of 5.5%. Meanwhile, adjusted total unit revenue (TRASM) fell 3.6%, reflecting softening travel demand and pricing pressures. Passenger revenue was flat year-over-year at $13.11 billion, with transatlantic business revenue down 3% but showing improvement in September due to rebounding Paris demand post-Olympics.

Looking ahead, Delta provided Q4 guidance with adjusted EPS expected between $1.60 and $1.85, slightly straddling the consensus of $1.78, and revenue growth of 2-4%, which fell short of expectations. Despite the headwinds, management expressed optimism as capacity adjustments begin to rebalance supply and demand, with international flights driving stronger profitability. Delta forecasts Q4 operating margins of 11-13%, an improvement from 9.4% in Q3, and pre-tax profit growth of 30% year-over-year to $1.4 billion. The results set the stage for other airlines, such as United Airlines (UAL) and American Airlines (AAL), to report in similar market conditions, as carriers collectively work to stabilize unit revenue and enhance profitability heading into 2025.