Don't Look Now, but Delta Air Lines Stock Is Up Nearly 50% in the Past Year

Despite a challenging macroeconomic backdrop, airline stocks have performed well over the past year. This is especially true for Delta Air Lines (NYSE: DAL). Shares in the legacy carrier have soared by nearly 50% in the past 12 months, trouncing the performance of even the S&P 500, which has delivered total returns of around 18% during the same time.

The key takeaway with Delta's outperformance is not that the stock has thrived despite operational headwinds. Make no mistake: Delta hasn't made moonshot moves due to "meme mania." Instead, improved results have driven this stock's strong performance.

Moreover, even after Delta's wave of outperformance, shares could reach even higher altitudes in the months ahead. Here's why.

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Delta and its wave of market outperformance

Much of Delta's strong run occurred after this year's energy supply shock, not before it. Back in March, when the geopolitical tensions in the Middle East caused crude oil prices to spike above $100 per barrel, Delta and other airline stocks briefly pulled back. Yet during the spring and summer, Delta shares surged even higher. Admittedly, an easing in energy prices after the initial shock likely contributed most greatly to this resurgence.

Yet while Delta has pulled back since its latest quarterly earnings release, Q2 2026 results contained quite a few green shoots for the remainder of the full year. For one, during the preceding quarter, Delta largely absorbed the impact of higher jet fuel prices. While aircraft fuel costs increased by around $1.65 billion year over year, the carrier reported just a $238 million decrease in operating income.

Chalk up this resilience largely to continued success with Delta's "premiumization" strategy. The airline now generates greater revenue from first-class ticket sales and upgrades than from main cabin ticket sales. It's therefore not surprising that management reiterated its full-year earnings guidance of between $6.50 and $7.50 per share.

More room to soar if resilience persists

Investors may have reacted somewhat negatively to Delta's latest earnings, but don't assume this transportation stock's rally will keep reversing course. For results to meet or beat expectations, Delta needs to remain able to pass along the cost of higher fuel costs to passengers, while at the same time lowering capacity and maintaining similar levels of travel demand.

Put simply, I believe Delta can easily thread this needle, even as Mideast tensions and, in turn, fuel prices, spike once again. So far, travel demand, particularly for premium travel, has yet to ease. U.S.-based carriers also continue to reduce capacity. For now, the ingredients remain in place for Delta to deliver solid results this year.

If this occurs, and earnings hit the high end of the aforementioned forecasts, the impact on Delta shares could be tremendous, even if the stock experiences a moderate rerating to 15 times forward earnings. Apply this against the top end of analyst forecasts, and one gets a price target of around $112.50 per share, or over 37% above Delta's current stock price.

Given this potential if current conditions hold, Delta's post-earnings pullback represents a strong buying opportunity.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.