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Delta (DAL) Stock Declines 14% Year to Date: Here's Why

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Despite positives like robust passenger revenues and a shareholder-friendly approach, shares of Delta Air Lines (DAL - Free Report) have lost 14.3% so far this year. Meanwhile, its industry has declined 28.6%.

YTD Price Performance

 

What’s Troubling the Stock?

High operating expenses have been ailing Delta for quite some time and the fourth quarter of 2018 is unlikely to be any different. High fuel and labor costs have contributed to the rise in operating expenses.

Notwithstanding the current downward trend, fuel costs are expected to limit bottom-line growth in the fourth quarter of 2018, results of which are expected next month. Fuel costs are anticipated to be between $2.47 and $2.52 per gallon in the final quarter of 2018, much higher than $1.93 a year ago. The Zacks Consensus Estimate for current-quarter earnings has been revised 3.1% downward over the last 90 days.

The decline in load factor (percentage of seats filled by passengers) in the first 11 months of the year does not bode well for Delta. The metric slipped  10 basis points to 85.6% due to capacity expansion outweighing traffic growth in the period.

Moreover, weather-related disruptions hurt Delta's operations frequently of late and might persist in the future, dampening profitability in the process.

Additionally, Delta’s projections for 2019 revenue growth and earnings per share at its investor day held earlier in December failed to match investors’ expectations, further resulting in the stock’s loss of value.

The company anticipates earnings per share between $6 and $7. The Zacks Consensus Estimate for the same stands at $6.62, lying below the upper end of the guided range. Also, revenues are expected to grow 4-6% next year. The consensus estimate reflects a 5.6% year-over-year top-line improvement.

 Zacks Rank and Stocks to Consider

Delta carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Air France-KLM SA (AFLYY - Free Report) , Spirit Airlines (SAVE - Free Report) and Frontline Ltd. (FRO - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Air France and Spirit Airlines have rallied 25.8% and 53.3%, respectively, in the past six months.Meanwhile, the Frontline stock boasts an impressive earnings history, having outpaced the Zacks Consensus Estimate in each of the trailing four reported quarters, the average being 69%.

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