Delta’s Stock Takes a Hit—Can Lower Oil Prices Fuel a Comeback?

Key Points

• Delta Air Lines surprised the industry when they abruptly slashed their Q1 2025 guidance by over 50% in many metrics.
• This caused a ripple effect in the selling of airline stocks.
• Crude oil prices fell $10 from their peak in Q1 2025, which gives Delta $1 billion of savings to buffer headwinds.

Delta Air Lines Inc. NYSE: DAL stock took a six-day sell-off at the beginning of March 2025 as sentiment soured from lower consumer and corporate confidence. Delta actually slashed its Q1 guidance by more than 50% in many metrics, which caused a sell-off ripple effect throughout the transportation sector and notably the airline industry.

Its peers, United Airlines Holding Inc. NASDAQ: UAL and American Airlines Group Inc. NASDAQ: AAL, took similar plunges as the group tends to move in lockstep with each other. However, investors may be wondering if they overreacted and whether the industry sell-off could be a buying opportunity.

Delta Slashed Just Raised Guidance

Delta Air Lines reported Q4 2024 earnings on January 10, 2025. The company earned $1.05 per share, beating consensus estimates by 9 cents. Revenue rose year-over-year (YOY) to $15.56 billion, firmly crushing the $14.2 billion consensus estimates by more than $1.2 billion.

The company raised Q1 2025 EPS guidance between 70 cents and $1.00, with a midpoint of 85 cents versus 77 cents consensus estimates.

Delta expects Q1 2025 revenue growth of 7% to 9% YOY or $13.44 billion to $13.69 billion versus $13.24 billion consensus estimates. However, they did issue full-year 2025 downside guidance of EPS of at least $7.35 versus $7.44 consensus estimates. Its three-year targets are 10% YOY EPS growth and $3 billion to $5 billion in free cash flow (FCF).

Delta Slashed Guidance Over 50%

On March 10, 2025, Delta issued downside guidance for Q1 2025, a day before the J.P. Morgan 2025 Industrials Conference. The company slashed its Q1 EPS to 30 cents to 50 cents, with a midpoint of 40 cents, down from its 85 cents midpoint estimate, versus 82 cents consensus estimates. Revenue growth was cut from 3% to 4%, down from 7% to 9%, or $12.9 billion to $13.1 billion, with a $13 billion midpoint. The company attributed the cuts to the economic climate and lowered consumer and corporate confidence.

This set a ripple across the industry as peer airlines witnessed their stocks sell off drastically afterward. The big question is whether this was a major reversal in demand or was it just a short-term anomaly. This was partially cleared up the following day.

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Airline Industry Faces Short-Term Booking Delays After Recent Disruptions

The delay in customer bookings is a short-term pullback driven by the shock of so many aircraft accidents. It's the disruption that they are used to. He got right to the point around the weakness experienced “collectively” in the industry. Bastien said the first quarter of every year is always the most volatile and the weakest demand set of the year. There was a lot of optimism closing out a strong 2024 heading into 2025. However, they may have overshot that optimism, expecting 8% YOY growth, but it now appears close to 4%, but "…it’s still growth nonetheless.” It wasn’t just one event but a series of events, including the 10 inches of snow in certain parts of the beach in the Panhandle, causing $100 million in damages. However, demand still appeared to be robust heading into the end of January 2025.

The Trend in Deadly Aircraft Accidents Have Impacted Demand for Air Travel

There have been 18 plane crashes in 2025, with at least 105 deaths in the United States. Delta CEO Ed Bastian noted how the mid-air collision between the Blackhawk helicopter and American Airlines flight 5342 at Reagan National Airport on January 29 was the deadliest aircraft incident in 25 years. He said the incident "…caused a lot of shock amongst our consumers. There's a whole generation of people traveling these days that didn't realize these things can happen...we saw a pretty immediate stall in both corporate travel and bookings, not that they stopped, but the growth rates that we had been on stalled considerably.”

Delta experienced its own incident on February 17, 2025, with no serious injuries, but it fed into another round of delay, causing the company to slash revenue guidance by $500 million in Q1 2025. However, on a positive note, oil prices have fallen from their peak in Q1. The company still maintains a healthy and positive outlook for the full year 2025.

$1 Billion in Savings From Falling Oil Prices

CEO Bastien pointed out that gas has fallen $10 per barrel from the peak in the quarter and concluded with, “At Delta, every dollar is a $100 million on an annualized basis. So, for us, $10 falls on a go-forward basis to about $1 billion. And for the same reasons why you see some of the weakness in the economic indicators and consumer sentiment around travel, you're going to see that also weighing on oil prices, and that's partly what's also going to help buffer us as we go forward looking at the year.”