Bernstein raises Delta Air Lines target price to $106 and reiterates Outperform

Overview

Following 2Q26 results, Bernstein reiterated its Outperform rating on Delta Air Lines Inc and raised its 12-month target price from $93 to $106. The core rationale is that 2Q26 adjusted EPS exceeded the high end of guidance and market expectations, FY26 EPS guidance remains strong, and the booking curve extending into 4Q continues to hold up well, while fares are expected to be more resilient than previously assumed against a backdrop of lower fuel prices.

Core views

The report's core view is that DAL's earnings upside comes not only from a single-quarter beat but also from industry supply discipline and structural pricing improvement. Diversified revenue streams including premium cabin, MRO, cargo, and corporate travel continue to support growth, while premium product expansion and a recovery in corporate sales enhance revenue quality. Bernstein believes that if fare declines are smaller than the decline in fuel costs, DAL may retain part of the spread as earnings, driving a sector re-rating.

Analysis framework

The report uses a combination of earnings variance, company guidance, market consensus, operating metrics, and valuation multiples. The earnings forecast upgrade reflects 2Q26 EPS outperformance, upside versus market expectations in 3Q/4Q guidance, and higher confidence in TRASM growth and fare resilience; the target price is derived by capitalizing NTM+1 EBITDAR and subtracting net debt one year forward, with a cross-check against the NTM+1 EPS multiple.

Methodology notes

• Valuation methodsEV/EBITDAR multiple method

  NTM+1 EBITDAR capitalization valuation

  Bernstein applies a 6.8x multiple to its NTM+1 EBITDAR forecast of $12.614B and subtracts net debt one year forward to arrive at a one-year target price of $106.

• Valuation methodsP/E cross-check

  Forward EPS multiple implied by target price

  The $106 target price implies 10.9x NTM+1 EPS of $9.70, used to test the reasonableness of the target price relative to the earnings forecast.

• Earnings forecastGuidance versus consensus comparison

  Comparison of company guidance, Bernstein forecasts, and market consensus

  The report compares actual 2Q26 EPS, new 3Q26 guidance, FY26 guidance, and market consensus to assess room for upward earnings revisions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Delta Air Lines Inc (DAL.US)

  Core covered name

  Strengths

  Earnings beat expectations, strong FY26 guidance, higher diversified revenue contribution, solid performance in premium cabin and corporate travel, and supply discipline supporting fare resilience.

  Weaknesses

  The report remains slightly more cautious than the company's implied guidance for 4Q, and its FY26 forecast is about 1% below the guidance midpoint; the airline business also remains exposed to fuel, macro, and capacity volatility.

  Comparison

  2Q26 adjusted EPS was about 3% above both consensus and Bernstein forecasts; the FY26 guidance midpoint was about 18% above pre-earnings market expectations.

  Risks

  Economic slowdown, weaker-than-expected air travel demand, higher fuel prices, stronger-than-expected capacity growth, intensifying competition, regulatory changes, and operational disruptions.

Key data

• 2Q26 adjusted diluted EPS$1.56Above the upper end of the $1.00-$1.50 guidance range and about 3% above both consensus and Bernstein forecasts.
• FY26 EPS guidance$6.50-$7.50The midpoint is about 18% above pre-earnings market expectations.
• Target price$106The previous target price was $93; this represents an increase of about 14%.
• Closing price$87.39As of 2026-07-10, the report shows implied upside of 21%.
• Diversified revenue mix61%Up 2 percentage points year over year.
• Premium revenue YoY growth17%Driven by strong yields and investment in premium seats.
• MRO YoY growth32%Described in the report as an important growth engine for the company.
• Cargo YoY growth39%Driven by strong volumes and about 5% above expectations.
• FY26 adjusted EPS forecast$6.92Bernstein raised its FY26 adjusted EPS forecast by 18%.
• FY27 adjusted EPS forecast$9.08Forward estimates were raised by about 9% on average.

Impact & implications

If the report's view proves correct, DAL's investment case would shift further from a cyclical recovery story toward earnings resilience driven by structural fare improvement, revenue mix upgrading, and supply discipline. The target price increase implies Bernstein believes the market still underestimates earnings power in 2H FY26 and subsequent years, particularly given strong 4Q bookings, potentially accelerating TRASM growth, and the margin transmission from lower fuel prices.

Risks

• A significant slowdown in the global or U.S. economy could suppress air travel demand.
• Changes in government regulation of air transportation services or marketing could have adverse effects.
• Weaker-than-expected air travel demand would undermine the case for revenue and earnings upgrades.
• Stronger-than-expected industry capacity growth could pressure fares and yields.
• Intensifying competition among airlines could affect margins.
• Upward volatility in fuel prices remains an important uncertainty.
• Unforeseen events such as geopolitics, strikes, system failures, and extreme weather could disrupt operations.

What to watch

• Whether 3Q26 TRASM YoY growth continues to accelerate from the roughly 12.4% level in 2Q26 as the report expects.
• Whether strong 4Q bookings can translate into actual fares and margins.
• Whether DAL can retain as earnings the spread between the decline in fuel prices and the decline in fares.
• Expansion of premium cabins, aircraft efficiency gains from MAX10 deliveries, and progress in international capacity expansion in the Middle East and Asia.
• Whether YoY growth in corporate sales at core and coastal hubs can continue.
• Whether cost pressure on low-cost carriers and industry supply discipline continue to support the fare environment.