Delta Air Lines Inc DAL

No-moat-rated Delta Air Lines reported considerably improved sequential revenue metrics in its June quarter as the airline benefits from the U.S. economy’s reopening, but increased fuel costs and network rebuilding expenses, such as maintenance from bringing aircraft out of storage and training, weighed on profitability. We generally think these rebuilding expenses will be one-time expenses in Delta’s cost structure and continue to believe that the carrier has permanently improved its cost structure due to pandemic-related restructuring. We are decreasing our fair value estimate by about 4.5% to $52.50 per share from $55 to account for Morningstar’s assumption of higher corporate taxes in the model and as we increase our near-term assumptions on fuel expense considerably to reflect higher oil spot prices.