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Delta (DAL) Shares Down 12% in a Month's Time: Here's Why
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Shares of Delta Air Lines (DAL - Free Report) have been trending downward on the bourses of late, declining 12% over the past month compared with its industry’s 10.7% fall.
Image Source: Zacks Investment Research
Let’s delve into the reasons for this unimpressive price performance and examine if the stock is likely to struggle in the near term as well.
The recent explosion in oil price fueled by the invasion of Ukraine by Russia is hurting airlines, and Delta is no exception. This is because fuel expenses represent one of their greatest input costs. Therefore, the health of airline stocks (with respect to the bottom line) is inversely proportional to the movement of oil price.
With oil price going through the ceiling, Delta reduced its capacity growth outlook for first-quarter 2022. Capacity in the March quarter is now expected to be to be roughly 83% of the first-quarter 2019 actuals (earlier expectation was in the 83-85% range). Delta now anticipates an adjusted fuel price of $2.80 per gallon compared with the previously expected range of $2.35-$2.50.
Due to higher staffing costs and employee-related expenses, Delta’s non-fuel unit costs (up 11% in 2021) are increasing. Non-fuel unit costs in first-quarter 2022 are expected to increase 15% from first-quarter 2019 levels. Delta expects to incur a pre-tax loss in the March quarter.
With oil price expected to keep rising, Delta’s bottom-line growth is likely to remain hampered, at least in the near term. Mainly due to increasing fuel costs, the Zacks Consensus Estimate for first-quarter loss has widened to $1.37 from $1.28, 60 days ago. The stock’s Momentum Style Score of F highlights its short-term unattractiveness. Moreover, Delta currently carries a Zacks Rank #5 (Strong Sell).
ArcBest currently carries a Zacks Rank #2 (Buy). ARCB has a stellar surprise history. Its earnings outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 31.4%.
Shares of ArcBest have rallied 5.6% over the past month. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB.
Ryder System is benefiting from improving economic and freight market conditions in the United States. R’s measures to reward its shareholders through dividends and share buybacks are encouraging. In February 2022, R entered into a $300-million accelerated share repurchase program, which will run through October 2022.
Ryder sports a Zacks Rank #1, currently. Its shares have gained 7.1% in a month’s time. The Zacks Consensus Estimate for current-year earnings has risen 29.6% over the past 60 days.
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Delta (DAL) Shares Down 12% in a Month's Time: Here's Why
Shares of Delta Air Lines (DAL - Free Report) have been trending downward on the bourses of late, declining 12% over the past month compared with its industry’s 10.7% fall.
Image Source: Zacks Investment Research
Let’s delve into the reasons for this unimpressive price performance and examine if the stock is likely to struggle in the near term as well.
The recent explosion in oil price fueled by the invasion of Ukraine by Russia is hurting airlines, and Delta is no exception. This is because fuel expenses represent one of their greatest input costs. Therefore, the health of airline stocks (with respect to the bottom line) is inversely proportional to the movement of oil price.
With oil price going through the ceiling, Delta reduced its capacity growth outlook for first-quarter 2022. Capacity in the March quarter is now expected to be to be roughly 83% of the first-quarter 2019 actuals (earlier expectation was in the 83-85% range). Delta now anticipates an adjusted fuel price of $2.80 per gallon compared with the previously expected range of $2.35-$2.50.
Due to higher staffing costs and employee-related expenses, Delta’s non-fuel unit costs (up 11% in 2021) are increasing. Non-fuel unit costs in first-quarter 2022 are expected to increase 15% from first-quarter 2019 levels. Delta expects to incur a pre-tax loss in the March quarter.
With oil price expected to keep rising, Delta’s bottom-line growth is likely to remain hampered, at least in the near term. Mainly due to increasing fuel costs, the Zacks Consensus Estimate for first-quarter loss has widened to $1.37 from $1.28, 60 days ago. The stock’s Momentum Style Score of F highlights its short-term unattractiveness. Moreover, Delta currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Investors interested in the Zacks Transportation sector may consider stocks like ArcBest Corporation (ARCB - Free Report) and Ryder System (R - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ArcBest currently carries a Zacks Rank #2 (Buy). ARCB has a stellar surprise history. Its earnings outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 31.4%.
Shares of ArcBest have rallied 5.6% over the past month. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB.
Ryder System is benefiting from improving economic and freight market conditions in the United States. R’s measures to reward its shareholders through dividends and share buybacks are encouraging. In February 2022, R entered into a $300-million accelerated share repurchase program, which will run through October 2022.
Ryder sports a Zacks Rank #1, currently. Its shares have gained 7.1% in a month’s time. The Zacks Consensus Estimate for current-year earnings has risen 29.6% over the past 60 days.