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Opinions John Stephenson
Delta Air Lines IncDALTOP PICKDec 16, 2015
John StephensonStock price when the opinion was issued
As of Oct 16, 2026. Market Open.
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He has avoided the boom-and-bust airline stocks for years. But the top airlines, recently, have become more durable. Loyal customers pay for the best seats at the front of the plane. DAL today reported small earnings and revenue misses and slashed their full-year earnings forecast by 24%. But shares turned positive anyway, because Wall Street saw this coming. But DAL guided for a higher than expected revenue growth. They're punished on their profits from high fuel costs, but demand for flights remains strong. DAL has generated enough revenue from first class and business class sales to offset those fuel costs. Also, they outsource their maintenance business which DAL thinks they can more than double in coming years. DAL leads peers in on-time arrivals and departures which is why premium customers will pay up.
Owns it for momentum. DAL is trading above its 200-day moving average. He likes their customer loyalty rewards program, and it has refinery exposure.
Joe TerranovaIt has a great run until earnings. The stock got ahead of itself. He didn't expect oil prices to rise this much, but ticket demand is there. Oil will remain a headwind, though.
Jim LebenthalThe correction is over. Airports are packed and flight sales are up.
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Premium contentOur PAST TOP PICK with DAL has triggered its stop at $82. To remain disciplined, we recommend covering the position at this time. When combined with previous guidance, this will result in a net investment loss of 4%.
Premium contentWe reiterate DAL as a TOP PICK. Consumer demand is rising -- and not just for economy seats, premium as well -- as customers look for greater experiences. The company is rumoured to be in discussions with a United regarding a possible merger. It trades at 9x earnings and supports a 20% ROE. We recommend trailing up the stop (from $76) to $82, looking to achieve $109 -- upside potential of 18%. Yield 0.7%
(Analysts’ price target is $107.93)Premium contentFollowing the recent dividend increase, we reiterate DAL as a TOP PICK. Management is confident dividend growth is sustainable as quarterly cash flows increase, while debt is reduced. The recent dividend boost of 15% is backed by a payout ratio under 20% of cash flow. It trades at 17x earnings, 3x book and supports a ROE of 20%. We recommend trailing up the stop (from $69) to $76, looking to achieve $110 -- upside potential of 18%. Yield 0.8%
(Analysts’ price target is $107.00)Has long-term legs. Earnings estimates are flat, shares are up, but it's overbought, though nothing is wrong with the fundamentals.
Jim LebenthalDelta and United are a duopoly. That's why both shares are up this year. UAL us up 22% this year.
Joe TerranovaPremium contentPremium contentWith recent quarterly earnings showing an increase in cash reserves and reduction in debt, we reiterate DAL as a TOP PICK. The airline has successfully managed rising fuel costs, while expanding margins amid rising global air travel demand. It trades at 15x earnings, 2.6x book and supports a 20% ROE. We recommend trailing up the stop (from $56) to $62, looking to achieve $94 -- upside potential of 18%. Yield 0.9%
(Analysts’ price target is $83.47)The fundamentals are not good given fuel costs soaring because of the war. Earnings have gone from +20% to -6%, but shares are up because DAL has its own oil refinery. DAL hit all-time highs last week.
Teal LindePremium contentThe international air carrier announced plans to add 31 wide body jets to expand its international foot print into larger margin destinations. It trades at 9x earnings, 2.2x book and supports a ROE of 27%. We like that cash reserves are growing, while debt is retired. We recommend setting a stop-loss at $56, looking to achieve $84 -- upside potential of 19%. Yield 1.0%
(Analysts’ price target is $84.19)
US has typically had a problem with capacity, so as the economy picks up, all the airlines come out with new planes, brings on too much capacity, and essentially over saturates the market, so margins collapse. Exactly the opposite is happening this cycle. They have been extremely disciplined. As one of the original legacy carriers, this is a very strong name that have cut costs down, has very strong margins with a powerful tailwind of lower fuel prices. Trading at roughly 9X next year’s earnings, so it is extremely cheap.