Delta Air Lines stock fell ahead of the open Friday even after earnings and revenue beat estimates, defying surging fuel prices. The carrier even reaffirmed the full-year guidance it set at the start 2026 -- before the Iran war.

But that's where the problem lies. The stock has jumped 28% so far in 2026, as higher airfares, strong demand and capacity cuts have helped mitigate fuel costs.

Delta has done a great job in offsetting the fuel surge, and returning to its initial 2026 guidance is commendable. But investors may have been expecting a bit more.

Delta reported adjusted earnings per share (EPS) of $1.56 on revenue of $17.7 billion. Analysts were expecting EPS of $1.49 on revenue of $17.5 billion in the second quarter. Delta even beat its own guidance of between $1 and $1.50.

But the big question facing airlines was whether higher airfares and strong demand could persist and keep the rally going into the rest of the year.

Delta's guidance doesn't give a definitive answer. It's expecting EPS of between $2 and $2.50 in the third quarter -- ahead of estimates. Full-year guidance for $6.50 to $7.50 per share also came in ahead of Wall Street's $6 view.

"We delivered $1.4 billion in pre-tax profit while absorbing the highest quarterly fuel expense in our history, reflecting broad demand strength, growing brand preference and momentum across our diversified revenue base," CEO Ed Bastian said.

The stock was down 4% shortly after the earnings release, while United Airlines and American Airlines were also down more than 1.5%.

This is breaking news. Read a preview of Delta's earnings below and check back for more analysis soon.

The second quarter was supposed to be a severe test for airlines but Delta's earnings Friday will likely signal that U.S. carriers passed with flying colors. But the sector faces a big challenge to keep the momentum going.

Hikes to airfares, cuts to capacity and relentless travel demand helped airlines mitigate fuel costs, which surged for most of the quarter amid the Iran war. Those three things now need to stay in place to build on the recent rally.

The Global JETS exchange-traded fund, which tracks the performance of airlines, has jumped 25% over the past three months. Delta Air Lines has climbed 31% over that period, while United Airlines is also up 34% and American Airlines has jumped 51%.

A spike in oil prices in recent days, after President Donald Trump said the cease-fire with Iran was over, has put the sector back under a bit of pressure. That weakness may end up helping the shares after the earnings release, giving them a bit more room to run if Delta's results come in strong before the open Friday.

Analysts are expecting earnings per share (EPS) of $1.49 on revenue of $17.5 billion in the second quarter. That would beat Delta's own EPS guidance of between $1 and $1.50.

"A quarter that threatened to be significantly disruptive looks to have had a happy ending with strong revenue trends, jet fuel back down below $3 and solid operating/cost performance," Morgan Stanley analyst Ravi Shanker said in a sector-wide preview of the earnings season earlier this week.

But the industry "faces another big test" in the next six months, he added. That's whether airfare pricing and capacity will revert to the mean or become the new normal. If it's the latter, then the industry will "go a long way toward achieving the multiple re-rating that it has been lobbying for and will likely attract more long-term investors."

Shanker has an Overweight rating on Delta and hiked his price target to $115, from $105, on Monday.

TD Cowen analyst Tom Fitzgerald also said holding on to recent price increases was key. "We remain broadly constructive, assuming the industry hangs on to this year's price increases," he said in a note Thursday. "We think the group is broadly set up well for 3Q guidance given a lot of inventory was booked at post-war prices and fuel looks set to be at more manageable levels," he added.

He rates Delta as a Buy with a $106 price target.

For the third quarter, Wall Street is looking for adjusted EPS of $2.03 on revenue of $17.3 billion.

Any signals on the strength of demand and pricing may be just as important as the numbers.

Write to Callum Keown at callum.keown@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 10, 2026 07:32 ET (11:32 GMT)

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