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Q3 Results Reaffirm Delta Air Lines' Potential For Investors
- Q3 Results for Delta were above analyst estimates in EPS, Revenue and EBITDA.
- Share price catalysts include lower crude prices, strong economic moat, and insulation from geopolitical factors.
- Delta remains a compelling investment in the airline sector given its corporate share gains, operational reliability and benefits from industry trends.
- Delta Air Lines reported Q3 '14 earnings.
- The stock remains a strong buy.
- The long-term tailwinds in the industry were anticipated to improve the earnings profile, but the short-term impacts of Ebola have been higher than expected.
Ebola Scare Provides Entry Point For Delta Air Lines
- Airline stocks are down due to Ebola fears, offering a low-price entry point for Delta Air Lines.
- The company has an eight out of nine Piotroski F-score, indicating financial strength.
- Delta Air Lines' PEG ratio and operating margins should entice investors.
Delta Air Lines: A True Market Leader In The Airline Industry
- Delta is showing strong valuation, which suggests that the company may still be quite cheap.
- The company is proving to be a true market leader by outperforming competitors.
- Stock movements present a great opportunity to enter the stock long in the near future.
- Delta released disappointing August traffic numbers.
- Stock remains a strong buy.
- The original investment thesis anticipated hiccups from Russia and Ebola.
- Delta has managed to increase profits from $593 million in 2010 to an impressive $2.7 billion last year.
- Delta has managed to initiate some very effective cost cutbacks in non-fuel costs of the company.
- Delta is protected from surges in fuel prices, owing to the fact that it has its own refinery in Pennsylvania.
- Delta's stock has been aided recently as oil prices have declined.
- Solid free cash flow and growing revenues have also contributed to Delta's rise as well.
- As fundamentals have improved, valuation multiples have become stretched, but share price momentum should remain.
- The United States Energy Information Administration, or EIA, forecast that average prices of both WTI and Brent crude oil will continue falling in 2014 and 2015.
- The overall effect of substantially lower oil prices will mean that people have more money to spend on discretionary items such as leisure traveling.
- Delta had a spectacular performance year in 2013, with the carrier’s profits soaring to $2.7 billion. Delta estimates that corporate spending on air travel will expand 7% in 2014.
- Delta Air Lines is a leading airline with presence in six continents. It is well positioned to reap the forecasted growth in air travel especially in the emerging markets.
- Its stock produced a fantastic 107% return in one year as a result of Delta’s zeal to attain industry leading operational efficiency.
- The capital structure re-balancing is improving its valuation.
- The consensus target price estimate reveals that Delta’s stock presents an enticing upside of 24%. Even the most conservative valuation presents an attractive upside of 11%.
- Good demand environment combined with modest capacity increases will result in solid top line growth.
- Delta has one of the lowest fuel prices in the industry. Owning a refinery and hedging should bring $350 million in fuel-cost saving for 2014.
- The company’s fundamentals and future outlook provide a strong buy rating.
- Travel fears with limited long-term impact have hit airline shares.
- Operating margins, new airplanes, and refinery success provide Delta Air Lines with an attractive stock price.
- Investors should continue holding Delta stock until it reaches a market multiple.
Why Delta Air Lines Stock Is Still A Great Investment Opportunity
- As the world’s second largest passenger airline, Delta will benefit from the improvement of air travel demand over the next years on recovering U.S. and global economies.
- Delta has compelling valuation metrics and strong earnings growth prospects; its Enterprise Value/EBITDA ratio is extremely low at 6.24.
- Delta’s stock is ranked first among all S&P 500 stocks, according to Portfolio123’s "Balanced4" powerful ranking system.
Despite Recent Obstacles, Delta Is Poised For Growth
- The spike in oil price had little impact on DAL stock.
- With M&A activities, the airline industry is ready to take off, as its EV multiples (EV/EBITDA and EV/EBIT) are relatively low compared to other industrial sectors. DAL is a leader.
- Delta is investing heavily in future growth, garnering bullish sentiment through improved operational efficiency.
- Delta is building upon its current capabilities to capitalize on the growth prospects that will be available in the next two decades.
- Airbus expects air travel to grow at a CAGR of 4.7%.
- Delta has shown that it is putting serious effort into making its operations more efficient.
- Delta is the leader of the pack in the airline industry and continues to produce good financial performance.
- With a return of 116.97% over the past year, Delta Air Lines (DAL) has shown great earnings growth and superior profit margins to its competitors.
- However, the company's lower cash ratios and high debt levels relative to its peers questions the sustainability of such high returns.
- With the threat of rising oil prices, investors should view Delta Air Lines as a trade rather than a long-term investment.
- Delta Air Lines, Inc. recently announced its plan for a 50% increase in its dividend per share and a $2 billion share repurchase program to be completed by December 2016.
- Delta is also hoping to reduce its debt to $5 billion before the end of FY 2016 by generating more cash flows from optimization of capital expenditures and improving performance.
- Delta has recorded strong upward movements in the earnings estimate revisions, indicating that analysts are becoming more hopeful regarding Delta's earnings for the current quarter and the fiscal year.
Yesterday, 3:19 PM
- Cowen Research says Q3 earnings and guidance from airliners have surprised to the upside.
- The positive comments from airliner management on PRASM and costs coincides with some share price loss in the sector over Ebola fears.
- Q4 margins are forecast to expand as lower fuel prices factor in.
- Domestic airline stocks: DAL, AAL, JBLU, UAL, ALK, HA, RJET, ALGT, LUV, SKYW, SAVE.
Yesterday, 1:51 PM
Tue, Oct. 21, 1:12 PM
- Airline stocks are putting in another volatile day as the Ebola headlines veer toward the positive side.
- Gainers: Spirit Airlines (NASDAQ:SAVE) +5.0%, American Airlines Group (NASDAQ:AAL) +5.3%, Southwest Airlines (NYSE:LUV) +4.7%, SkyWest (NASDAQ:SKYW) +4.1%, United Continental (NYSE:UAL) +2.9%, Delta Air Lines (NYSE:DAL) +2.5%, Allegiant Travel (NASDAQ:ALGT) +1.9%, JetBlue (NASDAQ:JBLU) +2.3%, Alaska Air Group (NYSE:ALK) +1.9%.
Mon, Oct. 20, 10:03 AM
- Fares on domestic flights are higher this year than a year ago, despite an increase in capacity across the sector, according to a forecast from Expedia EXPE.
- Thanksgiving flights showed a 17% increase on average to $467, while Christmas flights were up 2% to $493.
- A total of 21M Americans are expected to fly between October and December.
- The outlook could calm some fears that bookings or pricing are off with Ebola concerns cropping up in the U.S.
- Related stocks: DAL, AAL, JBLU, UAL, ALK, HA, RJET, ALGT, LUV, SKYW, SAVE.
Thu, Oct. 16, 7:59 AM
- Delta Air Lines (NYSE:DAL) reports passenger revenue per available seat mile rose 2.4% in Q3.
- Mainline carrier revenue +8% to $8.14B.
- Regional carrier revenue -3% to $1.63B.
- Capacity was up 3.2% across the company, led by a 16.2% gain in Latin American routes.
- Aircraft fuel expense +29% to $2.95B.
- The carrier doesn't mention Ebola in its earnings press release.
- DAL -4.2% premarket.
Thu, Oct. 16, 7:32 AM
Wed, Oct. 15, 5:30 PM
Wed, Oct. 15, 11:49 AM
- Airline stocks are under pressure again after a report indicates that the second hospital worker to contract Ebola in the Dallas region flew a commercial flight earlier this week.
- The group has been battered around on Ebola fears over the last few weeks, despite little indication of any impact on bookings so far.
- On watch: DAL, AAL, JBLU, UAL, ALK, HA, RJET, ALGT, LUV, SKYW, LFL, GOL, SAVE.
Wed, Oct. 15, 5:25 AM
- A second healthcare worker has contracted Ebola in the U.S.,
- The worker, a staff member at Texas Health Presbyterian Hospital, was among those who looked after Thomas Duncan, who died of the virus earlier this month.
- More on Ebola
- Related health stocks: TKMR, BCRX, HEB, INO, NLNK, NNVC, OTCQB:GOVX, SRPT, CMRX, GSK, IBIO, APT, LAKE, SRPT, PLX, NSPH, SMED, VSR, AHPI
- Airlines: DAL, AAL, UAL, SKYW, ALGT, HA, LUV
- Hotels: MAR, HLT, IHG, STAY, H, HOT, CHH
- Lodging REITS: AHT, SHO, LHO, INN
Tue, Oct. 14, 3:31 PM
- Global growth, foreign-exchange, oil, and small caps are the subject of every client inquiry, says David Kostin. His team's recommendation: Buy "American exceptionalism."
- In Kostin's view, U.S. economy and corporate fundamentals are still strong, with economic growth expected by Goldman economists to be 3.2% next year, the fastest expansion since 2005. Europe is expected to grow just 1%.
- What his team likes are those stocks of companies which have a high proportion of domestic sales, plus sectors like Consumer Staples (XLP -0.1%) and Discretionary (XLY +0.7%) which stand to benefit from lower oil prices (plunging again today).
- As for small caps (IWM +0.9%), Kostin is wary, noting downward earnings revisions have boosted small cap P/E ratios even as prices have declined.
- The list of S&P 500 names capturing two or more of Kostin's themes: GT, GM, PCLN, AMZN, CMCSA, LOW, DG, TSN, ADM, CVS, AVP, WAG, PXD, HAL, JPM, BAC, SCHW, PNC, MS, C, GNW, LNC, MET, THC, AET, UNH, ESRX, HUM, WLP, BIIB, GILD, DAL, CMI, FLR, CRM, JBL, MA, FB, MU, FSLR, VMC, MON, T.
Tue, Oct. 14, 2:20 PM
- Airline stocks trade higher as Ebola fears ease off a bit and lower oil prices factor in.
- The sector has been volatile ever since the first Ebola case was reported in the U.S.
- Decliners: Delta Air Lines (NYSE:DAL) +5.5%, American Airlines Group (NASDAQ:AAL) +9.5%, United Continental (NYSE:UAL) +5.3%, SkyWest (NASDAQ:SKYW) +5.5%, Allegiant Travel (NASDAQ:ALGT) +4.2%, Hawaiian Holdings (NASDAQ:HA) +3.8%, Southwest Airlines (NYSE:LUV) +4.2%.
Mon, Oct. 13, 3:36 PM
Fri, Oct. 10, 3:42 PM
- Passengers have been allowed to depart Delta (DAL -2.4%) flight 495 in Las Vegas after a passenger who exhibited Ebola-like symptoms was examined.
- Previously: Sign of the times: Plane surrounded in Vegas on Ebola fear
Fri, Oct. 10, 3:28 PM| 5 Comments
Thu, Oct. 9, 9:49 AM
- Select airline stocks stage an early rally, led by a big pop for United Continental (UAL +6.2%) following its report on Q3 PRASM gains.
- There's some commentary from Wall Street on the sector which is also contributing to sentiment: UAL has been added to the Focus List at Credit Suisse and Morgan Stanley is calling for gains for the majors.
- Gainers: Delta Air Lines (NYSE:DAL) +1.7%, Alaska Air Group (NYSE:ALK) +1.5%, American Airlines Group (NASDAQ:AAL) +1.0%, JetBlue Airways (NASDAQ:JBLU) +0.7%.
Tue, Oct. 7, 3:53 PM
- Innovative Solutions (ISSC -44.7%) shares are cut nearly in half after the designer of flight guidance and cockpit display systems says Delta Airlines (NYSE:DAL) has terminated its contract with the company to provide a cockpit upgrade for its fleet of MD88 and MD90 aircraft.
- ISSC says it is in discussions with DAL regarding the parties' obligations under the contract, which represented ~$62M of its reported backlog as of June 30, 2014.
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