Delta Air Lines(NYSE: DAL) just wrapped up its centennial year with positive trends that continue to defy the broader airline industry. In addition, Delta president Glen Hauenstein told investors in 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 the stock? After all, shares trade at just 9 times earnings and free cash flow is pouring in at record levels.
Let’s take a closer look.
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Delta’s fourth-quarter revenue rose 1.2% year over year. That’s a deceleration compared to Q3, when total revenue rose 4.1% year over year. Further, Delta’s non-generally accepted accounting principles (GAAP) earnings per share fell 16% year over year during this period.
Despite a deceleration in top-line growth and a decline in earnings, management was upbeat. This is, in part, because the Delta continues to outperform the overall airline industry.
“Over the past three years, we’ve generated $10 billion in free cash flow, allowing us to strengthen our investment-grade balance sheet and reduce leverage by more than 50%,” explained Delta CEO Ed Bastian during the company’s fourth-quarter earnings call. “Our return on invested capital of 12% is well above our cost of capital, placing us in the upper half of the S&P 500 and leading the industry.”
But the biggest reason for management’s optimism is probably what’s going on in the first few weeks of the year.
“2026 is off to a strong start with top-line growth accelerating on consumer and corporate 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 saw “record bookings with cash sales up double digits on top of the strength that we saw last year.”
With this background, it’s not surprising that management is optimistic about Q1. Delta said it expects first-quarter revenue to rise 5% to 7% year over year, marking a significant acceleration. Even more, 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 52% year-over-year growth.
For the full year of 2026, management refrained from providing a revenue target, but it 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 momentum is a consistent narrative over the past couple of years that has been a key driver for the company: Its premium positioning. Sales of its premium products, which include ticket sales at the front of the cabin, have remained resilient. Even in Q4, when the company’s overall sales growth slowed meaningfully, Delta’s premium products revenue rose 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 Q1 guidance, alongside management’s commentary that the first few weeks of the year are off to a great start, adds to the bull case for the stock.
Still, even though shares look attractive, investors should keep in mind 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. With this 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 shares of the airline. However, this 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 meaningful position in the stock would probably be during a period when fear is driving the stock lower. However, it’s possible that Delta’s sales growth accelerates throughout 2026. With this in mind, I do 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.
