The Airlines’ Grip On Demand Tightens

Delta Air Lines’ earnings report for the 2026 first quarter stand out not just because of the growth itself, but where that growth is coming from, as the Atlanta-based air carrier continues to expand its highest-quality revenue streams with premium revenue growing at a double-digit pace, loyalty revenue rising approximately 13% year-over-year through its American Express partnership, and corporate travel continuing its recovery. All of which are layered on top of a network that spans roughly 19.5 million seats per month and maintains about 19% share of the U.S. market.

This demand strength is not happening in isolation, though, as Delta’s operational scale, expanding network reach, and ongoing fleet optimization continue to support both volume and pricing power. In the same vein, the company also generated approximately $2.4 billion in operating cash flow and $1.3 billion in free cash flow during the quarter, reinforcing that the business is still highly cash generative even as it operates within a capital-intensive structure supported by total debt near $20 billion. 

The Dissatisfaction: Costs Are Rising Just As Fast

Investors weren’t satisfied with the earnings beat as the same quarter that delivered a 9% increase in revenue also saw adjusted fuel expense rise 8.2% year-over-year to $2.59 billion, while the average fuel price increased 6.9% to $2.62 per gallon and non-fuel unit costs climbed approximately 6%. Showing that nearly every dollar of incremental revenue is being met with a corresponding increase in operating expense.

Perhaps this becomes clearer when looking at profitability, as operating income rose only to $569 million compared to roughly $546 million in the prior year while operating margin declined slightly from about 4.3% to 4.2%, confirming that growth is being absorbed rather than converted into expanding margins, no thanks to the rising input costs.

A Defensive But Critical Advantage

What separates Delta from much of the industry in this environment is its refinery, which continues to act as a structural buffer against rising fuel costs, as the company reported that the refinery reduced fuel prices by $0.06 per gallon during the quarter, translating into roughly $60 million in savings at Delta’s scale.

While fuel expense still rose 8.2% year-over-year, meaning the refinery does not eliminate cost pressure, it reduces volatility and provides a level of cost control that most competitors simply do not have, especially in an industry where fuel prices can spike violently due to geopolitical disruptions and supply constraints.

This advantage matters more in periods like this because when costs are rising across the board, the companies that can reduce the rate of increase, even slightly, gain a structural edge.

This is Fundamentally a Strong Business

The broader financial picture reinforces this tension, as Delta continues to generate strong operating cash flow of $2.4 billion and free cash flow of $1.3 billion, while maintaining a sizable but gradually improving debt position near $20 billion – reflecting a business that is fundamentally strong but operating within tight margins due to external cost pressures.

At the same time, management has made it clear that protecting profitability is now a priority, with CEO Ed Bastian stating that the company is reducing capacity growth and adjusting operations to recapture higher fuel costs, a move that reflects a shift away from maximizing volume toward protecting margins through pricing discipline and network optimization.

From Defense to Offense: Why The Refinery Could Capitalize On The Iran-U.S. Ceasefire

This is an interesting setup because of how quickly it can change, as recent geopolitical developments, including easing tensions following the Iran–U.S. ceasefire, introduce the possibility of stabilizing or even declining oil prices, which would directly reduce Delta’s largest expense category.

If that happens, the impact is not linear. Lower fuel prices reduce cost, while the refinery continues to provide additional savings, creating a compounding effect where both external relief and internal advantage begin to work in the same direction.

In that case, the same structure that is currently being used to defend margins becomes a driver of expansion.

The Technical Reaction

The reaction becomes more telling, as Delta’s stock surged sharply on earnings from about $67 to a peak near $74, an almost 10% spike, followed by an immediate selling pressure right at the highs. RSI jumped into overbought territory near 70 before quickly rolling over to the low 40s, confirming momentum faded just as fast as it came.

Price is now slipping below the short-term EMAs, suggesting that the move was driven more by short-term positioning than sustained institutional accumulation, reinforcing hesitation despite the earnings beat.

Conclusion: A Margin Story Ready to Turn

Delta Air Lines is not facing a demand problem, as revenue is growing to $13.7 billion, premium and loyalty segments are expanding, and the company continues to operate from a position of strength across its global network.

The challenge lies in protecting margins, as rising fuel costs and increasing operating expenses are absorbing much of that growth, leaving operating margins slightly compressed at 4.2% despite higher revenue.

Hence, a forward-looking bullish thesis holds if Delta’s refinery continues scaling its fuel and cost-efficiency advantage, strengthening its role from a defensive buffer into a structural margin driver, and if the Iran–U.S. ceasefire holds and oil prices stabilize or decline, allowing fuel costs to ease while Delta’s cost advantage remains intact.

In addition, Wall Street forecast first-quarter earnings of 76 cents per share, which would be about 15% year-over-year growth, driven by an increase in advertising revenue. The Street expects that revenue to account for 6% of total revenue for 2026, as compared to 3% for 2025, coupled with strong subscriber growth. 

Price Hikes and Subscriber Growth Boost Netflix ARPU Outlook

Netflix has also raised subscription prices for the second time in less than two years. And while some churn is expected as a result of those price increases, the company—which now has about 325 million subscribers—appears confident that the additional revenue will more than offset any cancellations.

Plus, according to analysts at TD Cowen, the latest U.S. price increases represent an average hike of 11% across its offerings. These changes are expected to lift Netflix’s average revenue per user (ARPU) in the U.S. and Canada by about 6% year over year in 2026.

However, Netflix isn’t the only stock that analysts are bullish on ahead of earnings.

Nike Earnings Preview: Turnaround Efforts Face Key Test

Nike (NYSE: NKE), which hasn’t had a great start to the year, is also on deck for earnings. After starting the year at around $62, NKE is now down to $52 and sinking on weak sales, falling margins, and strong competition. And unfortunately, that’s expected to show up in earnings early next week, with Wall Street looking for EPS ranging from about 29 cents per share on revenue of around $11.2 billion. That would be a year-over-year (YOY) decline for EPS, with relatively flat YOY revenue growth.

We’ll also be paying close attention to guidance. Analysts expect Nike to post EPS of $2.37 for fiscal year 2027 on revenue of about $48.6 billion, which would be a YOY jump. We’ll also pay close attention to how the current turnaround plan is progressing to date.

Last trading at $52.07, Nike now sits at double-bottom support dating back to April 2025. If it breaks through that, Nike could test lows last seen in 2017.

Airline Industry Tailwinds and Risks Ahead of DAL Earnings

Delta Air Lines (NYSE: DAL) will post earnings before the market opens on April 8. At the moment, analysts are looking for a diluted EPS of 69 cents a share, up 50% year over year. For the current year, analysts expect DAL to report EPS of $6.85, up 17.7% from $5.82 in fiscal 2025.

The good news for Delta is that it’s well-protected from rising energy costs. Plus, analysts at Citi are bullish with a 30-day catalyst watch on Delta with a “Buy” rating. They note that Delta’s Trainer Refinery, a 185,000-barrel-per-day petroleum facility in Trainer, Pennsylvania, owned through Delta’s Monroe Energy subsidiary, covers 75% of the airline’s fuel. 

The firm added that Delta also has the highest pre-tax profit margin in the airline industry, “which serves as a buffer to EPS sensitivity and generates high-teens percentage of revenue from its Atlantic routes—second only to United,” as also noted by Seeking Alpha.

As the Iran war drives up jet fuel costs and passenger fares, and potentially reduces demand for international travel, Delta could be easily negatively impacted by the chaos. However, the company isn’t greatly sensitive to oil price moves, and a good deal of negativity was priced in when the stock dropped from about $76.18 to a low of about $55.28 a share. 

Better yet, while investors wait for the eventual recovery in the DAL stock, they can collect its dividends. Most recently, Delta declared a dividend of $0.1875, which was payable on March 19 to shareholders of record as of Feb. 26.

What It All Means for Investors This Earnings Season

As Netflix, Nike, and Delta Air Lines head into earnings, analysts are signaling a mix of opportunity and caution across sectors. Netflix appears best positioned for upside, supported by advertising growth, pricing power, and favorable macro tailwinds.

Meanwhile, Nike faces a pivotal test as it works through a challenging turnaround, and Delta offers a more balanced outlook with strong earnings growth tempered by macro uncertainty. For investors, the key takeaway is clear: earnings season isn’t just about results—it’s about guidance, execution, and which companies can sustain momentum in an increasingly complex economic environment.

Adding to the strain, jet fuel costs have skyrocketed—rising roughly 85% since the conflict began. Fuel is one of airlines’ largest operating expenses, and this dramatic increase puts immediate pressure on profitability. To offset these higher costs, many airlines have begun raising ticket prices, passing the burden directly onto consumers. However, higher fares can dampen demand, especially for leisure travel, creating a difficult balancing act for the industry.

Despite these headwinds, not all airlines are equally vulnerable. According to analysts at Citigroup, Delta Air Lines and SkyWest stand out as two of the least sensitive carriers when it comes to rising oil prices and economic uncertainty.

Airline Stocks to Buy: Delta Air Lines

Delta Air Lines (NYSE: DAL) has earned a “Buy” rating from Citi, which has also placed the stock on a 30-day catalyst watch. One of Delta’s most significant competitive advantages lies in its ownership of the Trainer Refinery, a 185,000-barrel-per-day petroleum facility located in Trainer, Pennsylvania. Operated through its Monroe Energy subsidiary, this refinery supplies approximately 75% of Delta’s jet fuel needs. This level of vertical integration is rare in the airline industry and provides Delta with a substantial hedge against volatile fuel prices.

In addition to its fuel strategy, Delta boasts the highest pre-tax profit margin among major U.S. airlines. This strong margin profile acts as a financial cushion, helping to mitigate earnings-per-share (EPS) sensitivity during periods of rising costs. Furthermore, Delta generates a significant portion of its revenue—estimated in the high teens percentage—from transatlantic routes, making it one of the leading players in international travel, second only to United Airlines.

For long-term investors, this pullback may present an opportunity. While waiting for a recovery, shareholders can also benefit from Delta’s dividend. The company recently declared a quarterly dividend of $0.1875 per share, reinforcing its commitment to returning capital to investors even in a challenging environment.

Airline Stocks to Buy: SkyWest

SkyWest (NASDAQ: SKYW) also offers a compelling investment case. Like Delta, SkyWest maintains strong pre-tax margins, which help buffer against economic shocks and rising operating costs. However, its primary advantage lies in its business model.

SkyWest operates under Capacity Purchase Agreements (CPAs) with major carriers, including United Airlines and American Airlines. Under these agreements, SkyWest is paid to operate flights on behalf of its partners, and crucially, those partners typically reimburse SkyWest for fuel costs. This arrangement effectively shields the company from fuel price volatility—one of the biggest risks currently facing the airline industry.

Because of this structure, SkyWest’s financial performance is less directly tied to fluctuations in oil prices compared to traditional airlines. As a result, it remains relatively insulated from the recent surge in fuel costs.

Like Delta, SkyWest’s stock has also experienced a pullback, dropping from around $111 to a low of $86.89. However, shares have begun to stabilize and show signs of recovery. At a recent price of $91.76, there is potential for the stock to climb back toward previous highs if market conditions improve and investor confidence returns.

The Right Airline Stocks Can Soar in Any Environment

While the airline sector as a whole faces significant challenges from rising oil prices, geopolitical uncertainty, and shifting travel demand, airline stocks like Delta Air Lines and SkyWest appear better positioned to weather the storm. Delta’s vertical integration and strong margins, combined with SkyWest’s fuel-protected contractual model, give both airlines a degree of resilience that many competitors lack.

For investors willing to navigate short-term volatility, these airline stocks could offer attractive opportunities—especially if oil prices stabilize and global travel demand begins to recover.

Regarding the print, Delta posted adjusted earnings per share of $1.55, beating out Wall Street’s consensus view of $1.53. However, on the top line, the airliner only managed to generate $14.61 billion, which missed expectations calling for $15.80 billion. Fortunately, management did have some good news to share, which may have mitigated some of the disappointment.

For the first three months of 2026, Delta has forecasted an increase in sales of as much as 7%. Further, adjusted earnings may land between 50 cents per share and 90 cents per share, well above the 72 cents per share anticipated by analysts.

Despite a mixture of data, investors took to the exits, leading to a 2.39% loss for DAL stock. As management admitted, Delta is sitting atop a so-called “K-shaped” economic recovery, meaning that top-line growth has been concentrated among higher-spending consumers. In theory, that should be a win for Delta, as travel isn’t exactly a pursuit of the underprivileged.

Unfortunately, K-shaped recoveries are also fundamentally problematic, especially in the aftermath of artificial intelligence. To make a long story short, the simultaneous productivity enhancement and the disruption of AI mean that while the K-shape’s upper arm is longer, it’s also thinner due to fewer participants.

Over time, that’s a sustainability concern — and it does seem that the market is responding to that risk. As such, there’s reason for both investors and traders to be cautious about DAL stock.

No Such Thing as Independent, Objective Truth in the Market

I’m going to share something that puts me at odds with 99% of the financial publication industry: there’s no such thing as independent, objective truth in the market. While this statement sounds nihilistic, it’s one of the most liberating concepts one can absorb. It’s also the point where, ironically enough, true knowledge of the market begins.

Invariably, if DAL stock continues on its descent, analysts will argue that the carrier is undervalued. However, you should be aware that this concept cannot be independently verified in the abstract. Undervaluation in this context only means a discount relative to an assumption, but nobody knows if that assumption will hold true or not.

Similarly, traders will turn to options-focused calculators to find Delta’s potential forward dispersion. In recent years, “expected move” calculators have grown popular in the finpub space as they supposedly provide statistical intelligence of potential kinesis. However, these calculators — and the “probability of profit” metrics that they spit out — are based on assumptions built from the Black-Scholes formula.

To be sure, the math undergirding Black-Scholes is elegantly brilliant and internally consistent. But just because a formula is elegant and consistent does not mean that it correctly describes reality. In fact, Black-Scholes is guaranteed not to be correct.

You don’t need to be a mathematical wizard to understand the key epistemological concern. Black-Scholes, of course, is Wall Street’s standard mechanism for pricing options, but it’s also a one-size-fits-all solution. So, whether you’re modeling risk for semiconductors, apparel manufacturers or airliners, the underlying derivatives are priced via this standardized formula.

When options-related content leads up to the Black-Scholes-derived probability of profit as the punchline, I can’t help but laugh. That’s where the analysis begins, not where it ends. When you embrace the non-existence of independent truth in the market, you free yourself from the presumptions of Black-Scholes or any other templated methodology.

Instead, we will let the data — the one that is specific to DAL stock — do the talking.

Finding ‘Truth’ in the Structure of DAL Stock

If a theist is ever to convincingly deliver objective evidence of a deity, it will almost certainly come in the form of a hierarchical framework. Mainly, that’s because there’s no one linear proposal — such as the fine-tuning argument — that neatly and logically concludes the existence of a higher power.

By the same logic, there’s no one financial metric that explains the behavior of a public security. That’s why fundamental, technical and even quantitative analysis should be taken with a grain of salt if the methodology is flat or single-layer. Instead, the only way that we can find “truth” — or at least as far as we can understand that concept in the market — is through hierarchical structure.

Using a dataset going back to January 2019, the forward 10-week returns of DAL stock would ordinarily land between $67 and $74 over the next 10 weeks (assuming a spot price of $69.33, Tuesday’s close). This demonstrates an upward bias as an aggregate behavior.

However, the market operates under a Markov property, meaning colloquially that the probability of tomorrow hinges on what happens today. Under a hierarchical framework, “today” can be defined as the current quantitative structure, where in the last 10 weeks, DAL stock printed six up weeks, leading to an overall upward slope.

Under 6-4-U conditions, the forward 10-week returns of DAL stock could be expected to lean slightly bearish, with outcomes expected to land between $65 and $74. Further, probability density would likely peak at just below spot, thus presenting risks for bullish traders.

What’s really interesting is that on a fixed, five-week-forward framework, DAL stock risks landing between $65 and $72. Given the adverse response to Delta’s earnings, it wouldn’t surprise me at all for a bear put spread to be in play.

Taking a Potshot Against Delta Stock

To be clear, I’m not suggesting an extended negative position against DAL stock. I do believe that over the next several weeks, Delta can regain its mojo. However, in the immediate aftermath of less-than-stellar earnings results — combined with DAL gaining a strong 19.31% in the trailing six months — the security could face some turbulent weather.

With the hierarchical analysis pointing to a downward distribution before a reversion to the mean, a bearish position could be profitable.

It’s a highly ambitious trade, but the 67.50/65 bear put spread expiring Feb. 20, 2026, may be intriguing. This trade requires a net debit of $94, which is the most that can be lost. Should DAL stock fall through the $65 strike at expiration, the maximum profit would be $156 or a payout of nearly 166%.

When Tiger Woods was at the peak of his dominance, analysts asked the same question before every major championship. Thinking about who’s going to win, are you taking Tiger or the field? Heading into 2026, investors can ask a variation of that question. That is, should you invest in Delta stock or take the field?  

A Sea of Sameness in 2025 

Airline stocks can be a challenging sector even during the best of times. However, these last five years have been particularly challenging. Demand cratered in 2020, and after operations returned to normal, it took the industry time to regain its footing. That said, demand was strong in 2025 until the government shutdown in November.  

However, as the following chart shows, investors could have picked Delta, United Airlines (NASDAQ: UAL) or Southwest Airlines (NYSE: LUV), and they would have had a nearly identical return. At any given time, one stock may have been better than the other, but buy-and-hold investors would have wound up in roughly the same place. 

But that was then. Savvy investors need to anticipate what could happen to the sector in 2026. In this case, industry dynamics favor a strong performance for Delta.  

Scarcity Works in Delta’s Favor 

Perhaps learning their lesson from prior slowdowns, airlines are managing slower demand by cutting flights rather than trying to fill their planes with teaser fares. However, that strategy plays into the hands of Delta thanks to its profitable loyalty program and focus on premium seating.  

Delta also reported high single-digit growth in business travel. And although the company isn’t known for international travel, the company’s international travel business, particularly to Europe and South America has been growing.  

Managing Expectations Is a Winning Strategy 

Speaking at the Morgan Stanley Global Consumer & Retail Conference, Delta chief executive officer (CEO), Ed Bastian, told investors that the impact of the government shutdown would result in the company missing its prior earnings guidance for the fourth quarter by about $200 million, or about 25 cents per share.  

There are at least two key takeaways for investors. First, it’s always a good sign when a company decides to get ahead of the news cycle. In this case, the only risk is if the Delta reports a larger loss in its report on January 9, 2026. Unless the market suffers from a particular black swan event in the next few weeks, that’s unlikely.  

Second, Delta also said that demand remains strong in December and into 2026. That means that the airline is putting its focus on where it should, which is in the future.  

Risks to the Thesis 

The most significant risk facing DAL stock in the short term is a second government shutdown at the end of January. As of this writing, Polymarket put the odds at 34%. That’s less encouraging than investors would like to see.  

Another concern is the broader economy. By the time we get to the first of the year, investors will be getting back to the regular cadence of economic data from the government. Jobs data continues to show a soft job market. If that trend continues, airlines would be one of the sectors to feel it the most. And even though Delta is focused on the premium consumer, it’s not without risk. 

A third risk is if the opposite happens. The economy is already “running hot” by historical GDP standards. What if it runs hotter in 2026. At some point, that will mean higher fuel prices. Delta Air Lines is relatively well protected from higher fuel prices through a combination of selective fuel hedging, ownership of the Trainer refinery, and strong pricing power. However, there would still be a limit to how much travelers are willing to pay.  

DAL Stock is the Biggest and the Best  

When investors discuss airline stocks, DAL stock is at or near the top of most lists. That sentiment was echoed by CNBC’s Jim Cramer, who recently referred to the airline as “kind of the biggest and best in the airlines.”  

The company’s dominance in the premium space of the airline industry, its focus and commitment to paying down its debt, and a favorable technical outlook suggest that if investors want exposure to the airline sector, the answer to the DAL stock or the field question is likely to be Delta.  

Here’s a surprise. They may not be looking at the artificial intelligence (AI) trade. In fact, there’s some evidence that the “smart money” is looking for opportunities to get in front of an end-of-the-year rally.  

For that to happen, it will mean a broadening of the market beyond the handful of tech stocks that have carried the market higher. In fact, I have three ideas for you that don’t involve the tech sector at all. Yet, each of these stocks has one or more catalysts from the government reopening that could make buying these savvy stocks a very profitable move.  

Savvy Stocks to Buy #1: Delta Air Lines 

You can’t say for sure, but it’s likely that the cancellation of flights across the country was a key catalyst to end the government shutdown. Analysts remind travelers that the government reopening won’t be a quick fix to reset air traffic. However, it’s likely that things will be back to normal by the December holiday crunch. 

That makes Delta Air Lines (NYSE: DAL) the first on this list of savvy stocks. In its third-quarter earnings report in October, Delta reported an overall increase in domestic travel of 5%, and an 8% increase in business travel in particular. The latter is a key metric that other airlines are still struggling with.  

DAL stock is flat in the 30 days ending November 10, but is still down about 4.3% in 2025. That puts it at a discount of more than 23% to its consensus price target of $71.54. And at a price-to-earnings (P/E) ratio of around 8.25x, DAL stock is trading at a discount to its historical average. 

Like many airlines, Delta is still working through a considerable amount of debt of around $22 billion. That resulted in the airline paying $701 million in interest expense alone in the last 12 months. However, since the Federal Reserve is expected to continue lowering interest rates, there is the possibility for Delta to refinance a portion of that debt at more favorable terms.  

Savvy Stocks to Buy #2: Newmont Corp.  

Gold continues to be one of the best trades in 2025 and Newmont Corp. (NYSE: NEM) is a best-in-class mining stock with plenty of upside.  

The spot price of gold took a much-needed breather in the last two weeks, falling under $4,000. But this is likely to be just a pause in a bullish pattern that is supported by the government reopening. Several conditions exist to suggest gold will continue to rise: 

• The federal government is still running annual deficits that come in at around 7% of GDP.  

• The Federal Reserve is at the beginning of a rate-cutting cycle that is likely to accelerate if the labor market remains soft or gets worse. 

• Central banks continue to buy gold at historic levels as part of the debasement trade against the U.S. dollar. 

Newmont stock dropped more than 20% from its high in mid-October. But it’s been moving steadily higher. At around $87 per share as of this writing, it’s right around its consensus price target. But several analysts have put the price of NEM stock at over $100, with Bank of America (NYSE: BAC) coming in at $115. 

At around 13x earnings, NEM stock is expensive compared to its historic average. But this isn’t an ordinary time. Earnings are expected to jump over 10% in the next 12 months, which would support a premium for the stock.  

Savvy Stocks to Buy #3: Walmart 

Walmart Inc. (NYSE: WMT) is last, but certainly not least on this list of savvy stocks to buy when the government reopens. The company has bucked the bearish sentiment that many retailers have noted. Its year-over-year numbers are flat, but for many retailers in 2025, that’s a win.  

Walmart has noted that the lower-income consumer, which is its core market, is under pressure. However, the company has also seen an increase in traffic from higher net worth consumers who are shopping at Walmart to make their discretionary dollars go further.  

That’s not likely to change as inflation is expected to remain around its current level of 3%, at best, and possibly move higher as the impact of interest rate cuts works its way through the economy. Simply put, Walmart sells what consumers need, not what they want.  

That makes the stock a buy even at a P/E ratio of around 38x, which is a premium to its historic average. WMT stock dipped about 10% from its 52-week high in October. But all signs point to the stock moving beyond that level, and possibly very quickly.