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Here's Why Investors Should Avoid Delta Air Lines (DAL) Now
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Delta Air Lines’ (DAL - Free Report) financial stability is challenged by high operating expenses and low liquidity. Elevated labor costs and fuel costs exacerbate the strain on the company's bottom line. Also, low liquidity impedes its ability to meet obligations, in turn making it an unattractive choice for investors’ portfolios.
Let’s delve deeper.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 16.13% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 6.01% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank: DAL currently carries a Zacks Rank #4 (Sell).
Unimpressive Price Performance: Delta Air Lines has declined 16.5% in the past year against its industry’s 6.8% growth.
Image Source: Zacks Investment Research
Bearish Industry Rank: The industry to which DAL belongs currently has a Zacks Industry Rank of 235 (out of 251). Such an unfavorable rank places it in the bottom 6% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Other Headwinds: The northward movement in operating expenses is adversely impacting Delta Air Lines’bottom line. This surge in operating expenses is primarily driven by the increase in labor costs.
In the second quarter of 2024,labor costs, comprising salaries and benefits (accounting for 29% of the total operating expenses), rose by 10% year over year to $4 billion in the second quarter of 2024. Fuel costs, too, remained high.
Delta Air Lines exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 0.40, raising liquidity concerns. A current ratio of less than 1 indicates that the company does not have enough cash to meet its short-term obligations.
Moreover, Delta Air Lines’high capex raises concerns as ahigh capex value in times of revenue weakness, as is the case with DAL, is not desirable.
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Kirby Corporation (KEX - Free Report) .
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have declined 0.8% in the past year.
KEX holds a Zacks Rank #2 (Buy) at present andhas an expected earnings growth rate of 40% for the current year.
The company has an encouraging track record concerning the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 8.7%. Shares of Kirby have climbed 33.7% in the past year.
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Here's Why Investors Should Avoid Delta Air Lines (DAL) Now
Delta Air Lines’ (DAL - Free Report) financial stability is challenged by high operating expenses and low liquidity. Elevated labor costs and fuel costs exacerbate the strain on the company's bottom line. Also, low liquidity impedes its ability to meet obligations, in turn making it an unattractive choice for investors’ portfolios.
Let’s delve deeper.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 16.13% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 6.01% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank: DAL currently carries a Zacks Rank #4 (Sell).
Unimpressive Price Performance: Delta Air Lines has declined 16.5% in the past year against its industry’s 6.8% growth.
Image Source: Zacks Investment Research
Bearish Industry Rank: The industry to which DAL belongs currently has a Zacks Industry Rank of 235 (out of 251). Such an unfavorable rank places it in the bottom 6% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Other Headwinds: The northward movement in operating expenses is adversely impacting Delta Air Lines’bottom line. This surge in operating expenses is primarily driven by the increase in labor costs.
In the second quarter of 2024,labor costs, comprising salaries and benefits (accounting for 29% of the total operating expenses), rose by 10% year over year to $4 billion in the second quarter of 2024. Fuel costs, too, remained high.
Delta Air Lines exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 0.40, raising liquidity concerns. A current ratio of less than 1 indicates that the company does not have enough cash to meet its short-term obligations.
Moreover, Delta Air Lines’high capex raises concerns as ahigh capex value in times of revenue weakness, as is the case with DAL, is not desirable.
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Kirby Corporation (KEX - Free Report) .
C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. CHRW has an expected earnings growth rate of 27.4% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have declined 0.8% in the past year.
KEX holds a Zacks Rank #2 (Buy) at present andhas an expected earnings growth rate of 40% for the current year.
The company has an encouraging track record concerning the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 8.7%. Shares of Kirby have climbed 33.7% in the past year.