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Here's Why Investors Should Retain Delta (DAL) Stock Now
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The uptick in air-travel demand (particularly on the domestic front) bodes well for Delta Air Lines (DAL - Free Report) . However, escalated fuel costs, a primary headwind, are limiting its bottom-line growth.
Factors Favoring DAL
The gradual improvement in air-travel demand is a huge boon for Delta, which currently carries a Zacks Rank #3 (Hold). Owing to this tailwind, Delta generated a double-digit operating margin for the first time since 2019 in second-quarter 2022.
In the June quarter, adjusted operating margin was 11.7%. The buoyant air-travel demand scenario is also evident from the fact that total operating revenues increased in first-half 2022 from the first-half 2019 (pre-coronavirus) levels.
The uptick in air-travel demand in the United States can be gauged from the fact that 75.9% of second-quarter 2022 passenger revenues came from the domestic markets. DAL expects the September-quarter revenues to increase in the 1-5% band (expected in the $12.6-$13.1 billion range) from the third-quarter 2019 actuals.
An increase in cargo revenues also bodes well for DAL. In first-half 2022, cargo revenues surged 48% to $561 million. The cargo unit is expected to continue performing well in the remainder of 2022. Delta expects to generate a “meaningful full year profitability”.
Key Risks
Escalating fuel costs pose a threat to Delta’s bottom line. Oil price is moving north, primarily because of supply concerns stemming from Russia's invasion of Ukraine. In second-quarter 2022, the average fuel price per gallon (adjusted) increased 85% from the second-quarter 2019 actuals to $3.82. In first-half 2022, the metric increased 62% from the comparable period’s level in 2019.
Due to higher staffing costs and employee-related expenses, Delta’s non-fuel unit costs (up 11% in 2021) are increasing. In first-half 2022, non-fuel unit costs increased 19% from the second-quarter 2019 levels. In the September quarter, the metric is expected to increase roughly 22% from the third-quarter 2019 actuals.
Continued recovery in air-travel demand bodes well for SkyWest. With an improvement in air-travel demand, SKYW carried 32.7% more passengers in first-half 2022 than the year-ago level. As a result, the passenger load factor (percentage of seats filled by passengers) expanded 1450 basis points to 82.1% in first-half 2022.
SKYW’s fleet-modernization efforts are commendable as well. The positivity surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised above 100% upward over the past 60 days. SkyWest has a Momentum Style Score of A. SKYW currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
C.H. Robinson is being aided by an improving freight scenario in the United States. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill confidence in the stock further.
CHRW has a pleasant earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one). The stock has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 17.6% upward over the past 60 days. C.H. Robinson currently carries a Zacks Rank #2 (Buy).
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Here's Why Investors Should Retain Delta (DAL) Stock Now
The uptick in air-travel demand (particularly on the domestic front) bodes well for Delta Air Lines (DAL - Free Report) . However, escalated fuel costs, a primary headwind, are limiting its bottom-line growth.
Factors Favoring DAL
The gradual improvement in air-travel demand is a huge boon for Delta, which currently carries a Zacks Rank #3 (Hold). Owing to this tailwind, Delta generated a double-digit operating margin for the first time since 2019 in second-quarter 2022.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the June quarter, adjusted operating margin was 11.7%. The buoyant air-travel demand scenario is also evident from the fact that total operating revenues increased in first-half 2022 from the first-half 2019 (pre-coronavirus) levels.
The uptick in air-travel demand in the United States can be gauged from the fact that 75.9% of second-quarter 2022 passenger revenues came from the domestic markets. DAL expects the September-quarter revenues to increase in the 1-5% band (expected in the $12.6-$13.1 billion range) from the third-quarter 2019 actuals.
An increase in cargo revenues also bodes well for DAL. In first-half 2022, cargo revenues surged 48% to $561 million. The cargo unit is expected to continue performing well in the remainder of 2022. Delta expects to generate a “meaningful full year profitability”.
Key Risks
Escalating fuel costs pose a threat to Delta’s bottom line. Oil price is moving north, primarily because of supply concerns stemming from Russia's invasion of Ukraine. In second-quarter 2022, the average fuel price per gallon (adjusted) increased 85% from the second-quarter 2019 actuals to $3.82. In first-half 2022, the metric increased 62% from the comparable period’s level in 2019.
Due to higher staffing costs and employee-related expenses, Delta’s non-fuel unit costs (up 11% in 2021) are increasing. In first-half 2022, non-fuel unit costs increased 19% from the second-quarter 2019 levels. In the September quarter, the metric is expected to increase roughly 22% from the third-quarter 2019 actuals.
Stocks to Consider
Some better-ranked stocks in the Zacks Transportation sector are SkyWest (SKYW - Free Report) and C.H. Robinson (CHRW - Free Report) .
Continued recovery in air-travel demand bodes well for SkyWest. With an improvement in air-travel demand, SKYW carried 32.7% more passengers in first-half 2022 than the year-ago level. As a result, the passenger load factor (percentage of seats filled by passengers) expanded 1450 basis points to 82.1% in first-half 2022.
SKYW’s fleet-modernization efforts are commendable as well. The positivity surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised above 100% upward over the past 60 days. SkyWest has a Momentum Style Score of A. SKYW currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
C.H. Robinson is being aided by an improving freight scenario in the United States. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill confidence in the stock further.
CHRW has a pleasant earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one). The stock has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 17.6% upward over the past 60 days. C.H. Robinson currently carries a Zacks Rank #2 (Buy).