Delta Air Lines (DAL) is set to report its fourth-quarter earnings on Friday, January 10, 2025, and investors are eagerly awaiting the results. The airline has been on a roll, with its stock price up 45.13% over the past year and 30.99% over the past six months. But can the bullish trends continue, or is a pullback on the horizon? Let's dive into the key factors that could impact DAL's earnings and stock price.



Analyst Expectations and Historical Trends

Wall Street analysts expect Delta to report earnings per share (EPS) of $1.76 and revenues of $14.21 billion in the fourth quarter. While these estimates represent year-over-year increases of 38.3% in EPS and 4.6% in revenues, it's essential to consider Delta's historical track record of meeting or beating analysts' expectations. In the past four quarters, Delta has surpassed Wall Street's bottom-line estimates in two instances while missing on two other occasions. However, the airline's strong financial performance in the third quarter, driven by robust operating cash flow and free cash flow, suggests that it is well-positioned for growth.



Premium Products: A Key Driver of Growth

Delta's focus on premium products has been a significant driver of its growth strategy. In the fourth quarter, the airline's premium product ticket revenue grew 10% compared to a 4% increase in its main cabin ticket revenue. This trend is part of a broader shift in Delta's revenue mix, with premium revenue representing 35% of its total revenue in 2023, up from 24% in 2014. The International Air Transport Association (IATA) data confirms that the return of business and premium travelers is an industrywide event, setting Delta up nicely for a strong summer traveling season.



Legal Dispute with CrowdStrike: A Potential Headwind

Delta's legal dispute with CrowdStrike (CRWD) has had a significant impact on its operations and financial performance. In July 2023, a CrowdStrike update caused a system outage that led to around 7,000 flight cancellations for Delta. This resulted in an estimated $500 million in costs for the airline. While Delta has filed a lawsuit against CrowdStrike, the ongoing legal dispute has likely contributed to the decline in Delta's net income, which is expected to drop by 45% to $1.12 billion in the fourth quarter of 2023 compared to the same period in 2022.



Analyst Ratings and Price Targets

Analysts' consensus rating on Delta Air Lines stock is very bullish, with a "Strong Buy" rating overall. The stock has a unanimous “Strong Buy” rating from all 20 analysts covering it, with an average analyst price target of $75.74. This indicates a potential upside of 24.8% from the current price levels. However, investors should be cautious and consider the potential impact of the CrowdStrike dispute on Delta's financial performance.

In conclusion, Delta Air Lines' fourth-quarter earnings report will be a critical test of the airline's ability to maintain its bullish trends. While analysts expect strong growth in EPS and revenues, investors should be mindful of the potential headwinds posed by the ongoing legal dispute with CrowdStrike. As always, it's essential to stay informed and make investment decisions based on a thorough understanding of the company's fundamentals and the broader market trends.