By Bill Peters
‘While the broader macro environment has been more resilient than feared, overall airline-industry demand has looked tepid,’ analyst says
The second-quarter earnings season will begin a little more quietly than usual this week, with results from Delta Air Lines Inc. due on Thursday.
Wall Street’s advice? Keep expectations low.
TD Cowen analyst Tom Fitzgerald, in a research note last week, cited “stable” but also “tepid” demand for flight tickets, as the U.S.’s trade wars and related negotiations keep people anxious over the broader economy. And as the peak summer travel season picks up, he said he isn’t expecting much from airline stocks.
“We believe U.S. airline shares will be biased downward over the near term due to persistent pricing weakness,” Fitzgerald said. “We do not expect them to catch a bid until there’s greater clarity on consumer demand and 2026 industry pricing. This year increasingly looks like a lost year.”
Among headwinds, New Jersey’s Newark Liberty International Airport – a major hub serving the New York metro area – has suffered from dropped connections in its communications network, understaffing among air-traffic controllers and runway repairs that have snarled travel. Similar issues have emerged at other airports, while geopolitical conflicts in the Middle East have threatened to push fuel prices higher.
The airline industry is expected to trim flight schedules to stay in line with weaker demand. Delta (DAL) Chief Executive Ed Bastian, during the company’s earnings call in April, said that “given broad economic uncertainty around global trade, growth has largely stalled.”
“The impact has been most pronounced in domestic, and specifically in the main cabin, with softness in both consumer and corporate travel,” he added.
As MarketWatch noted last week, analysts expect premium seating classes and other high-end offerings – which Delta has focused more on in recent years – to fare better than demand in the main cabin. They also expect international travel to outperform domestic travel. Those trends could help better shield the three major U.S. carriers – Delta, United Airlines Holdings Inc. (UAL) and American Airlines Group Inc. (AAL) – from the worst of the industry’s current threats to sales and profits.
More extensive detail on the state of the economy and the consumer will come next week, when JPMorgan Chase & Co. (JPM) and some of the other big banks report results. Those banks have typically reported during the same week as Delta.
Still, even as the economy holds up, Delta’s shares are down around 16% so far this year.
“While the broader macro environment has been more resilient than feared, overall airline-industry demand has looked tepid,” Fitzgerald said.
The call to put on your calendar
Levi’s and the tariff deadline: Levi Strauss & Co. (LEVI) reports quarterly results on Thursday. Those results, and the conference call that executives will hold with analysts afterward, could offer more context on the aftermath of July 9, when a 90-day break from the steepest U.S. tariffs on other nations is set to end.
Analysts have said Levi’s has enough levers to pull to offset most of the tariffs – including more leeway to keep prices higher – and noted that the company had gained popularity with younger shoppers as it tries to sell more clothing besides jeans. The U.S. last week announced a trade deal with Vietnam, where a lot of shoes and clothes get made. But some analysts say that deal likely sets the stage for more tariff hikes on other nations who also produce much of the apparel sold in the U.S.
During Levi’s earnings call in April, executives said China accounted for around 1% of the goods that the company brought into the U.S., with some 5% from Mexico and “mid-to-high single digits” from Vietnam. They added that nations like Bangladesh, Cambodia, Egypt, Pakistan and Sri Lanka were also essential to its manufacturing.
The number to watch
Costco’s monthly sales growth: Costco Wholesale Corp. (COST) is set to release sales figures for the month of June on Wednesday. The membership warehouse chain typically puts out those results with little fanfare. But analysts will be watching for signs of growth, or lack thereof, as shoppers stay budget-conscious amid higher prices and worries about the economy.
Elsewhere, results during the week from packaged-foods company Conagra Brands Inc. (CAG) will provide an indirect look at consumer behavior in the grocery store.
-Bill Peters
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07-06-25 1000ET
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