Delta poised for multiple rerating on margins
The guest argued that Delta Airlines is a best-in-class operator positioned for a multiple rerating driven by robust margin growth.
The argument
Despite historical drawdowns, the company's demand model has proven resilient across multiple cabin tiers and price points. Falling oil prices are expected to act as a tailwind, further supporting the margin expansion thesis.
The thesis, stress-tested
✓ What validates it
- ✓Next quarterly earnings showing operating margin expansion
- ✓Continued strength in premium cabin ticket yields
▸ Risks discussed
- ▸Spikes in jet fuel prices could erode margin gains
- ▸Broad macroeconomic slowdown could impact premium cabin demand
Hear it yourself
"So your original case was, can the broadening out continue to happen? And I think you can for that reason. Oil has come down. Rates have come down. Whatever shock was going to be in rates for the Russell is compensated with lower oil prices. And maybe those rate cuts, Frank, are not off the table as we wrote them off pretty recently. Maybe we'll either see a stable rate environment or a cut or maybe two in the next couple of months. Alright. Mike, I wanna come over to you. Speaking of the equal weight, it's actually doubling the S and P market cap weight over the last two months."
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