Transportation

What to Look for in Delta Air Earnings

Chris Lange

Published: April 13, 2016 12:05 pm

Last Updated: January 13, 2020 10:49 am

Delta Air Lines Inc. (NYSE: DAL) is scheduled to report its first-quarter financial results before the markets open on Thursday. The consensus estimates call for $1.29 in earnings per share (EPS) on revenue of $9.27 billion. In the same period of the previous year, the company posted EPS of $0.45 and $9.39 billion in revenue.

Despite the improved bottom line, however, a number of the major airline stocks have been down of late. Factors such as a reduction in customer revenue per available seat mile, increasing labor costs and heated competition are all weighing on investor sentiment this quarter, and improved bottom lines are proving insufficient to boost valuation.

This isn’t necessarily a bad thing, however. Rarely do we see such a divergence between net income and market capitalization, and this could offer an opportunity to get in at a discount ahead of valuation realignment. Take Delta and Alaska Air Group Inc. (NYSE: ALK), for example. Both are down double-digit percentage points on last year’s highs. With this said, which airlines look the most attractive at current rates?

At last count, Delta came out on top from a market value perspective, followed by Southwest Airlines Co. (NYSE: LUV) and American Airlines Group, Inc. (NASDAQ: AAL). Looking at price-to-earnings (P/E) ratios, however, the story is a little different. Trailing P/E puts American ahead, with a ratio of 3.47, versus the 8.27 of Delta and the 13.64 of Southwest.

Prior to the release of the earnings report, a few analysts weighed in on Delta stock:

• JPMorgan reiterated an Overweight rating with a $66 price target.
• Credit Suisse has an Outperform rating but lowered its price target to $59 from $61.
• Deutsche Bank reiterated a Hold rating with a $55 price target.

So far in 2016, Delta has underperformed the market, with the stock down about 5%. However, over the past 52 weeks the stock is up over 10%.

Shares of Delta were trading up 2.4% at $47.77 midday Wednesday, with a consensus analyst price target of $64.07 and a 52-week trading range of $34.61 to $52.77.