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Delta Shares Rise After Stronger-Than-Expected 2020 Earnings Forecast

Delta Airlines is forecasting stronger-than-expected 2020 earnings at its investor day in Atlanta, but notes 737 MAX return uncertainty alongside consumer sentiment risks.

Delta Airlines Inc  (DAL) - Get Delta Air Lines Inc. Report shares jumped higher Thursday after the carrier forecast stronger-than-expected 2020 earnings and a pledged to return a substantial portion of its cash flows to investors. 

Delta said it sees earnings for its 2020 fiscal year in the region of $6.75 to $7.75 per share, up 25 cents at the higher end from its earlier forecast, with revenues of $47 billion and free cash flow coming in at $4 billion. Around 70% of that, Delta said, will be returned to shareholders in the form of buybacks and dividends. 

"We are executing well against our strategic priorities and on track for a record 2019 – a testament to the incredible work of Delta employees worldwide who serve our customers with a focus on providing exceptional travel experiences each and every day," said CEO Ed Bastian in a statement ahead of the group's investor day in Atlanta. "As the industry leader, Delta is well positioned for long-term growth, with a focus on extending our unmatched competitive advantages, enhancing our global scale and growing brand preference."

Delta shares were marked 1.9% higher in the opening minutes of trading Thursday following the investor day statement to change hands at $56.10 each, a move that would lift its year-to-date gain to around 12%, well shy of the 25.3% advance for the S&P 500 benchmark. 

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Bastian said the key risk to the group's 2020 earnings target, which sits just ahead of the Refinitiv forecast of $6.99 per share, is linked to U.S. consumer sentiment. He also noted that the group's full-year revenue forecast, with calls for 6% to 8% topline growth, accounts for the ongoing uncertainty over the timing of the return to service of Boeing's  (BA) - Get The Boeing Company Report  737 MAX jet.

In early October, Delta said it sees current quarter earnings in the region of $1.20 to $1.50 per share, and expects revenues to grow by more than 5% from the prior year period. 

Bastian said at the time that it might take "longer than people think" for Boeing's grounded 737 MAX jet to return to service, and suggested it may be brought back into the carrier's schedule in January of next year, a timetable that echoes a similar assessment from rival American Airlines Group  (AAL) - Get American Airlines Group Inc. Report .