Myles Walton from UBS upgraded Delta Air Lines to Buy from Neutral, as he expects better pricing.

Analysts have also increased their price target from $44.00 to $53.00 to reflect this fact.

“The implied 12% improvement in TRASM in 2Q22 vs. 2Q19 is well ahead of the mid-SD we thought possible and implies a unit revenue gain 35% larger than the unit cost increase due to fuel highlighting the current ability of Delta to push through elevated costs. DAL has been slower than peers to restore capacity by choice as latest schedules suggest -16% vs 2019 in 2Q while our coverage avg ex-DAL is -7%, but that restraint has allowed for consistent solid operating performance and we suspect share pick-ups as others struggle,” Walton said in a client note.

Walton, on the other hand was downgraded from Buy to Neutral with a $51.00 share price target. The analyst sees “visible headwinds” facing UAL, while the recent run-up in shares also brings the valuation into the spotlight.

“Although we see strong pricing in 2Q and beyond, the operational picture could be less smooth for UAL as they adapt to an aggressive growth strategy. UAL’s planned capacity growth profile is continuing to be trimmed in 2Q. This will impact estimates of CASM ex as well as put doubt on the target gains (9% pretax margins) for 2023, that were set out last summer and reiterated last quarter. Part of the capacity changes have been responses to the high fuel environment and slower international reopening.”

Delta stock was down 0.2% pre-open Monday. UAL shares trade almost 1% higher.

By Senad Karaahmetovic