Delta Air (DAL) will kick off earnings season with its report 1/13 before the open and the Street looking for Q4 to be at $0.13 EPS and $9.14B in Revenues (+130% Y/Y) while Q1/FY22 seen at ($0.72)/$8.32B and $2.88/$41.95B implying a FY22 revenue/EPS growth rate of 43% and 167.8% respectively. DAL shares have closed lower on earnings six of its last seven reports with an average max move of 4.55%. The $25.7B leading Airliner trades 14.3X Earnings, 7.3X EBITDA and 2022 FCF Yield seen at 5.4%. Airliners are facing plenty of headwinds into 2022 with the Omicron variant disruption, weather, and higher labor/commodity costs. DAL hosted a Capital Markets Day back on 12-16 outlining its three-year financial targets with a goal of returning to pre-pandemic earnings by 2024 with operating margins seen in the mid-teens. DAL is positioning itself as a best-in-class premium airline and with $7 EPS targeted for 2024 shares imply $70+ value. DAL has also been investing in International markets and sees pent-up demand. Analysts have an average target of $51 with short interest low at 3% of the float. BAML upgraded shares to Buy last week with it the preferred name due to a strong balance, sheet, cheaper valuation and more capacity discipline to peers. On the chart DAL shares have been in a narrow falling channel since March 2021 and last week rallied back to near upper 2021 value and the falling 200-day moving average. A large weekly falling wedge pattern is setting up and above $42 could a meaningful inflection point to start a leg higher as weekly MACD is starting to cross bullish. The move can carry shares back to pre-pandemic levels near $55-$60. DAL options are pricing in a 2.76% move on earnings with 30-day IV Skew at +2% comparing to the +1.2% 52-week average. DAL’s put/call open interest ratio is at the 70^th percentile and average IV30 crush is around 8%. DAL has seen mostly bullish positioning with a buyer of 10,000 March $39 calls on 11/26 a top trade and has also seen size buys in June $40 and $41 calls while March $40 and $44 calls have also seen size buys. DAL also has a 10,000 block of February $37 calls bought $1.96 on 12/1 in OI.

Trade to Consider: Long the DAL March $42/$45 Call Spreads for $1.15 Debit