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The Weeks Stock Pick - Delta Airlines

|Includes: AAL, ALGT, ALK, Delta Air Lines, Inc. (DAL), HA, JBLU, LUV, RYAAY, SAVE, SKYW, UAL
Delta Airlines

If 2014 was the year that airline stocks took off, then 2015 has been one in which many companies in the sector have reached cruising altitude. Take Delta Air Lines (NYSE:DAL) for example. The company saw shares rise by about 75% in 2014 but so far in 2015, shares have been in the red and are basically in-line with the S&P 500.

Given this lackluster performance so far this year, many investors might think that some airline stocks have seen their best days and that more outperformance isn't in the cards. However, DAL in particular has seen some very promising activity as of late and this could be a stock that is poised for a Q4 surge in many investor portfolios.

Earnings Estimates

Investors have seen very positive activity on the earnings estimate revision front as of late as many analysts have been ratcheting up their expectations for DAL. We actually haven't seen any new estimates go lower in the past sixty days for the current year, next year, or current quarter time frames. instead, we have seen eight estimates go higher for the current year in the past two months and six higher for the next year time frame.

The magnitude of these shifts in expectations has also been impressive but especially for the next year time frame suggesting that the DAL story has plenty of legs. Consider that two months ago we saw EPS estimates of $5.26/share for DAL's next year earnings and today we are seeing a consensus estimate of $5.49/share instead. This is now 20% growth for the next year time frame which is already on top of 39% growth projected for this year!

DAL is also riding a nice streak of earnings beats as the company has beaten in each of the last four quarters meaning they know how to meet and manage lofty expectations. No wonder DAL has been able to secure a Zacks Rank #1 (Strong Buy) putting it into very rare company.

Delta Airlines Stock Chart

Style Scores

But a top Zacks Rank isn't the only reason to like DAL right now as the stock is one of the only companies to earn a coveted 'triple play' of 'A' scores in Value, Growth, and Momentum. Only 20% of stocks receive an 'A' grade so a being in the top quartile for all three is pretty impressive.

Some of the highlights for this stock's impressive metrics include an ROE that is nearly double the industry average, with DAL's coming in at 30.8%, a PEG ratio below 0.5, and then surging price momentum that has seen Delta stock outperform its peers over the past 12 weeks and the past 52 weeks. You can see all of DAL's solid metrics on the Delta stock style score page.

Bottom Line

With low oil and the prospect of declining commodity prices in the near term, airline stocks stand to benefit. Add in lower competition and better pricing power and investors have a compelling reason to consider the space right now.

DAL really stands out in the group though as the company has seen rising earnings estimates and it still has a very low PE. Plus, no matter if you are a growth or a value investor, there is something to like about DAL right now. So if you are looking to catch a ride on the airline stocks heading into Q4 definitely give Delta Air Lines a closer look for your portfolio.

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