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Here's Why You Should Hold Delta Air (DAL) in Portfolio Now
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Delta Air Lines, Inc. (DAL - Free Report) is benefiting from a strong liquidity position and robust air travel-demand scenario. However, escalating fuel cost is worrisome.
Factors Favoring DAL
The buoyant air-travel-demand scenario is also evident from the fact that total operating revenues increased 36.49% in first-quarter 2023 from year-ago levels.
Backed by strong booking trends for summer, DAL expects June-quarter revenues (adjusted) to increase in the 15-17% band from second-quarter 2022 actuals. Operating margin for full-year 2023 is expected in the range of 10-12%. Adjusted earnings per share are expected to be between $5 and $6. Delta Air’s liquidity position is encouraging. The airline ended first-quarter 2023 with cash and cash equivalents of $6,611 million, much higher than the current maturities of debt and financial lease of $2,136 million. This implies that the company has sufficient cash to meet its current debt obligations. DAL's efforts to repay its debts are encouraging too.
Key Risk
Escalating fuel costs pose a threat to Delta’s bottom line. Oil price is moving north primarily because of supply concerns due to Russia's invasion of Ukraine. In first-quarter 2023, the average fuel price per gallon (adjusted) increased 10% from first-quarter 2022 actuals to $3.06. Management expects the metric in the range of $2.55-$2.80 for the June quarter.
Zacks Rank & Key Picks
Delta Air currently carries a Zacks Rank #3 (Hold).
Copa Holdings, which currently sports a Zacks Rank #1 (Strong Buy), is being aided by the improved air-travel-demand situation. Management expects the current-year load factor (percentage of seats filled by passengers) to be 85%, assuming the rosy traffic scenario continues. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 669% and 65% growth, respectively, on a year-over-year basis.
Alaska Air Group, currently carrying a Zacks Rank #2 (Buy), also benefits from the buoyant air travel-demand situation. On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March quarter. ALK expects to boost its fleet and workforce in 2023 to meet the anticipated high demand.
For second-quarter and full-year 2023, ALK’s earnings are expected to register 12% and 44.8% improvements, respectively, on a year-over-year basis.
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Here's Why You Should Hold Delta Air (DAL) in Portfolio Now
Delta Air Lines, Inc. (DAL - Free Report) is benefiting from a strong liquidity position and robust air travel-demand scenario. However, escalating fuel cost is worrisome.
Factors Favoring DAL
The buoyant air-travel-demand scenario is also evident from the fact that total operating revenues increased 36.49% in first-quarter 2023 from year-ago levels.
Backed by strong booking trends for summer, DAL expects June-quarter revenues (adjusted) to increase in the 15-17% band from second-quarter 2022 actuals. Operating margin for full-year 2023 is expected in the range of 10-12%. Adjusted earnings per share are expected to be between $5 and $6.
Delta Air’s liquidity position is encouraging. The airline ended first-quarter 2023 with cash and cash equivalents of $6,611 million, much higher than the current maturities of debt and financial lease of $2,136 million. This implies that the company has sufficient cash to meet its current debt obligations. DAL's efforts to repay its debts are encouraging too.
Key Risk
Escalating fuel costs pose a threat to Delta’s bottom line. Oil price is moving north primarily because of supply concerns due to Russia's invasion of Ukraine. In first-quarter 2023, the average fuel price per gallon (adjusted) increased 10% from first-quarter 2022 actuals to $3.06. Management expects the metric in the range of $2.55-$2.80 for the June quarter.
Zacks Rank & Key Picks
Delta Air currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Alaska Air Group (ALK - Free Report) .
Copa Holdings, which currently sports a Zacks Rank #1 (Strong Buy), is being aided by the improved air-travel-demand situation. Management expects the current-year load factor (percentage of seats filled by passengers) to be 85%, assuming the rosy traffic scenario continues. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 669% and 65% growth, respectively, on a year-over-year basis.
Alaska Air Group, currently carrying a Zacks Rank #2 (Buy), also benefits from the buoyant air travel-demand situation. On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March quarter. ALK expects to boost its fleet and workforce in 2023 to meet the anticipated high demand.
For second-quarter and full-year 2023, ALK’s earnings are expected to register 12% and 44.8% improvements, respectively, on a year-over-year basis.