Sector Update: Financial Stocks Decline Thursday Afternoon

October 9 - Delta Air Lines (DAL.N) shares fell nearly 5% in pre-market trading to $78.12. Due to a surge in jet fuel prices, Delta Air Lines (DAL) on Friday lowered its full-year adjusted profit forecast. The U.S. airline now expects adjusted earnings per share in 2026 to be between $5.10 and $5.60, down from the previous guidance of $6.5 to $7.5 per share. The current midpoint of $5.35 per share is lower than analysts’ expectations of $5.46 per share. DAL expects its annual fuel costs to rise by about $6.0 billion, compared to an earlier projection of a $4.0 billion increase. Analysts tracking DAL have given it an average “Buy” rating, according to data compiled by LSEG. So far this year, Delta Air Lines stock has risen 18.4%, the highest increase among major U.S. competitors. (For the convenience of non-English speakers, Reuters automatically translates its reports into several other languages. Since automated translations may contain errors or lack the necessary context, Reuters does not guarantee the accuracy of automated translation texts, which are provided solely for readers’ convenience. Reuters assumes no responsibility for any damage or loss resulting from the use of automated translation services.)

On October 9, TD Cowen lowered its price target for UnitedHealth Group (UNH.N) from $430 to $402 ahead of the company's third-quarter earnings report on October 13. The brokerage stated that the widely expected third-quarter medical cost ratio of 89.9% and earnings per share of $4.12 are "well within reach." The report pointed out that recently announced Medicare star ratings have fallen as anticipated, which is expected to create a $1.5 billion revenue headwind in 2028. The new price target represents a 6.9% upside from the stock's previous closing price. "We also expect management to comment on preliminary expectations for 2027 Medicare Advantage (MA) enrollment growth and may emphasize a focus on margins over enrollment growth," the brokerage added. Earnings forecasts remain unchanged, but a lowered valuation multiple led to the reduction in price target. Among 29 brokerages, 23 rate the stock a "buy" or higher, while 6 rate it "hold"; the median price target is $483.82, according to LSEG data. As of the previous close, the stock is up 12.3% year-to-date.

October 9 - Snack and soft drink giant PepsiCo (PEP.O) warned on Thursday that the recovery of growth and profit margins in its key North American market will take longer than planned, and stated it will implement further cost-cutting measures to offset weak demand for its snacks and beverages. Twenty-five analysts have given the stock an average rating of "Hold," with a median target price of $145, according to data compiled by LSEG. JPMorgan (rating: "Neutral," target price: $137) pointed out that the company remains strong in international markets, but demand for snacks and beverages in North America remains weak, with limited signs of near-term improvement. Deutsche Bank (rating: "Hold," target price: $132) noted that PepsiCo's North American Beverages (PBNA) segment continues to lag the competition, with weak profit margins. Although the company plans to strengthen brand investment and execution, the path to sustained improvement remains unclear. Piper Sandler ("Overweight," target price: $140) indicated that the company faces weak U.S. demand and cost pressures. While new protein and hydration products may support growth, such prospects have yet to be validated. RBC Capital Markets ("Sector Perform," target price: $150) highlighted that North American beverages remain the main drag, while franchise re-authorization could support longer-term growth.