Is Delta Air Lines stock worth buying?

Delta Air Lines (Delta)Air Lines ) (NYSE: DAL)It recently released its financial results, and the business results were excellent, meeting almost all of the requirements that many investors look for in a company in the transportation industry. As a result, Delta Air Lines continues to be a good investment option for those looking for long-term growth.

That's the total view of Delta Air Lines. Now, let's take a closer look at why Delta Air Lines is the best airline stock to buy right now.

Delta Air Lines meets all conditions

Delta's investment rationale is based on the following beliefs: the longevity of the commercial air travel complex, the airline's shift to higher-margin High-Box services (including High-Box cabin ticket sales), and loyalty-related revenues. In addition, investors expect Delta to be able to control costs and achieve a full-year free cash flow target of $3 billion to $4 billion in order to be able to pay down debt accumulated during the pandemic.

The good news is that the company's first-quarter earnings further realized all of these goals.

Revenue and costs

A few weeks ago, Delta's management told investors that its first quarter adjusted revenue would be in the upper half of the 3%-6% guidance range, and investors were not disappointed. Adjusted revenue grew 6%, with total revenue per available seat mile (TRASM) reaching a solid 19.17 cents, compared to 19.3 cents in the same period last year.

However, Delta's costs were much better than previously forecast. For example, this quarter's guidance was for a 31 TP3T increase in non-fuel cost per available seat mile (CASM-Ex), while the actual result was a 1.51 TP3T increase to $14.08.

The total aggregate CASM of 20.04 cents was lower than the 21.25 cents recorded in the same period last year, as the one-time pilot fee of CASM 1.41 cents in the first quarter of 2023 did not recur.

Ultimately, the adjusted operating margin increased from 4.5% to 5.1%.

Looking ahead to the second quarter, Mr. Koon expects

• Adjusted revenue growth 5%-7 driven by capacity growth 6%-7%

• CASM-Ex growth 2

• Operating margin of 14%-15

Given the importance of the summer travel season to Delta's year-round performance and the impressive start to the first quarter, management has maintained full-year performance guidance.

Delta Air Lines is transforming with the High Bird.

In addition to the excellent headline numbers, Delta is continuing to push forward with its goal of focusing on the High B耑 traveler. On the revenue side of the equation, there are three key items to focus on. The first is the strong growth in high-bound ticket sales. Glen Hauenstein, Delta's president of mass transportation, said on the earnings call, "We will continue to add more High-Bowl seats. We believe this is one of the key drivers for us to continue to accelerate the achievement of our industry peers.

Second, loyalty travel award revenue (awards booked by customers when they redeem SkyMiles under their loyalty program) grew by 14%.Third, in the "Other Revenue" line item, Delta's loyalty program revenue grew by 9.5% to $795 million - this includes miles redeemed for non-air travel, revenue from brand use, and "obligations included in sold miles."

As a result," said Hauenstein, "Aggregate revenue from the loyalty program grew 12% to a record $1.7 billion in the quarter as a result of the continued strength of Amex's branded carriers. Delta Air LinesAmerican ExpressCredit cards are the primary source of inside sales. Koon expects American Express' contribution to Delta Air Lines to grow from $6.8 billion in 2023 to $10 billion over the long term.

Data from Delta Air Lines SEC filings. yoy = year-over-year. *Excludes third-party oil refinery sales.

What It Means for Delta Air Lines Investors

Delta's High-B耑 ticket sales and loyalty-related revenues are growing faster than overall revenue and much faster than main cabin revenue. This will help improve its margin profile. Additionally, growth in the SkyMiles program, which targets younger, more affluent customers, has been a boon to its credit card-related payroll.

Meanwhile, Delta continues to utilize its cash flow to pay down its debt, paying down $700 million in the quarter and planning to pay down $4 billion by 2024.

This would reduce Delta's debt earnings multiple to a level commensurate with investment grade debt(Moody's)(which has rated its debt investment grade), the stock looks extremely valuable given that it trades at 7.3 times Wall Street's 2024 earnings estimates and under 9 times 2024 free cash flow estimates.

Should you invest $1,000 in Delta Airlines now?

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American Express is an advertising郃 partner of The Ascent, a division of The Motley Fool.Lee Samaha does not own any of the above stocks.The Motley Fool holds shares of Moody's Corporation, which it recommends.The Motley Fool recommends Delta Air Lines.The Motley Fool has a The Motley Fool has a disclosure policy.

Is Delta Air Lines Stock Worth Buying? This post was originally published by The Motley Fool.