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Here's Why Delta's (DAL) Shares Have Lost 30.7% in a Year

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Delta Air Lines, Inc.’s (DAL - Free Report) shares have lost 30.7% in the past year compared with the industry’s 24.6% decline.

Reasons Behind the Plunge

Like other airlines, Delta has been hit hard by dwindling passenger revenues. As evidence, the company reported a wider-than-expected loss per share due to the plunge in passenger revenues. Revenue passenger miles (a measure of air traffic) tumbled 83% to 11,545 million.

Delta is trimming capacity to match the coronavirus-induced sharp decrease in traffic. Notably, capacity (measured in available seat miles) contracted 63% to 28,290 million in the September quarter. With the fall in traffic outpacing the capacity reduction, the load factor (percentage of seats filled by passengers) was down to 41% from 88% a year ago.

Even though Delta’s cash and cash equivalents at the end of third-quarter 2020 exceeded its current debt levels, we note that it received a total of $5.4 billion via the payroll support program under the CARES Act, which expired on Sep 30. While a $3.8-billion amount was paid through grants, $1.6 billion was paid via 10-year loans. This is likely to worsen its debt profile.

As the carrier suffers weak travel demand in the wake of the coronavirus outbreak, modest fuel prices should provide some cushion to deal with the softness in revenues. Notably, expenses toward aircraft fuel and related taxes saw a substantial fall of 78% in the September quarter.

Unfavorable Estimate Revisions

The Zacks Consensus Estimate for the next-year bottom line widened from a loss of $10.33 to a loss of $10.60 per share in the past 60 days.

Zacks Rank & Stocks to Consider

Delta currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , FedEx Corporation (FDX - Free Report) and Herc Holdings Inc. (HRI - Free Report) . Knight-Swift carries a Zacks Rank #2 (Buy), while FedEx and Herc Holdings sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, FedEx and Herc Holdings is pegged at 15%, 12% and 12.6%, respectively.

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