Analyst: Delta Has 25% Upside

In a report published Thursday, analysts at Imperial Capital maintain their Outperform rating on

, as well as the price target of $69. The company has reported higher-than-expected 1Q15 results. "Some investors appear to be overly concerned with near term PRASM weakness as the result of a stronger US dollar. However, this weakness is being more than offset by lower foreign currency expenses and significantly lower jet fuel costs," the analysts said. Imperial Capital expects Delta Air Lines to report record operating results through 2015, while expecting "management to continue to utilize cash from lower fuel to repurchase additional shares and continue to deleverage the balance sheet, both permanent changes to the airline's capital structure." These measures should help the company close the trading gap with its high quality peers. In addition, despite the decrease in jet fuel prices, the company has been working proactively to address capacity issues, given the stronger US dollar. While announcing its 1Q15 earnings results, the company also announced that it intended to decrease its international capacity by about three percent for the winter schedule of 2015, especially in markets that are most impacted by the strength of the US dollar. The analysts have accordingly revised their 2Q15 and FY2015 estimates.