Delta says 2026 is off to a good start, and demand trends will improve in the new year.
The most recent quarter showed slower year-over-year adjusted revenue growth and weaker year-over-year adjusted earnings per share.
Even though the stock has risen sharply in recent months, its valuation still looks cheap.
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Delta Airlines(NYSE: DAL) just concluded its centennial year with positive trends that continue to challenge the airline industry as a whole. Additionally, Delta President Glen Hauenstein told investors on the company’s fourth-quarter earnings call that 2026 has “started off with great momentum.”
With strong business momentum, is this a good time to buy shares? After all, the stock trades at just 9 times earnings and free cash flow is hitting record levels.
Let’s take a closer look.
Image source: Getty Images.
Delta’s fourth-quarter revenue increased 1.2% year over year. This is a slowdown compared to the third quarter, when total revenue increased 4.1% year over year. Additionally, Delta’s non-GAAP earnings per share fell 16% year over year during this period.
Despite a slowdown in revenue growth and a decline in profits, management was optimistic. This is, in part, because Delta continues to outperform the airline industry as a whole.
“Over the past three years, we have generated $10 billion in free cash flow, allowing us to strengthen our investment-grade balance sheet and reduce leverage by more than 50%,” Delta CEO Ed Bastian explained during the company’s fourth-quarter earnings conference call. “Our return on invested capital of 12% is well above our cost of capital, putting us in the top half of the S&P 500 and leading the industry.”
But the main reason for management’s optimism is probably what is happening in the first weeks of the year.
“2026 is off to a strong start, with revenue growth accelerating due to corporate and consumer demand,” Bastian said in the company’s fourth-quarter earnings release.
In fact, Delta noted in its earnings call that in the week leading up to its Jan. 13 earnings release, the company posted “record bookings with double-digit cash sales on top of the strength we saw last year.”
With this background, it is not surprising that management is optimistic about the first quarter. Delta said it expects first-quarter revenue to increase 5% to 7% year over year, marking a significant acceleration. Furthermore, it expects non-GAAP earnings per share for the period to be between $0.50 and $0.90, with the midpoint of this range implying year-over-year growth of 52%.
For the full year 2026, management stopped short of providing a revenue target but said it expects non-GAAP earnings per share to be between $6.50 and $7.50. The midpoint of this range implies about 20% year-over-year growth.
Behind Delta’s push is a consistent narrative from recent years that has been a key factor for the company: its premium positioning. Sales of its premium products, which include front-of-cabin ticket sales, have remained resilient. In the fourth quarter alone, when the company’s overall sales growth slowed significantly, Delta’s premium product revenue increased 7% year over year.
Delta’s financial momentum is impressive even without the context of the stock’s cheap valuation. Of course, when investors realize that the stock is trading at just 9 times earnings, Delta’s financial performance becomes even more notable. And Delta’s strong first-quarter guidance, along with management’s comments that the first few weeks of the year are off to a great start, add to the bullish case for the stock.
Still, while the stock looks attractive, investors should be aware of the risks. Not only is the airline industry cyclical and capital intensive, but airlines carry large amounts of debt on their balance sheets, and Delta is no exception. The company has an adjusted net debt position of about $14 billion. That said, the company is generating significant free cash flow, so its debt is easily manageable at the moment. Delta’s free cash flow in 2025 was $4.6 billion.
Overall, I think the stock’s cheap valuation, combined with early 2026 momentum, makes it a good time to buy airline shares. However, it is still a high-risk stock and investors should keep their positions in the company very small. History has shown how quickly an airline’s fortunes can change if travel demand slows. A better time to build a more significant position in the stock would probably be during a period when fear is driving the stock down. However, Delta’s sales growth is likely to accelerate throughout 2026. With this in mind, I think Delta stock looks attractive today for investors with a high risk tolerance.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
Delta Says It’s Started 2026 With ‘Big Momentum’ – Time to Buy Stock? was originally published by The Motley Fool
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