We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Retain Delta (DAL) Stock Now
Read MoreHide Full Article
Delta Air Lines (DAL - Free Report) is benefiting from improved air-travel demand and shareholder-friendly stance. However, escalating fuel costs are worrisome.
Factors Favoring DAL
Continued recovery in air-travel demand, particularly on the domestic front, bodes well for Delta. DAL anticipates third-quarter 2023 adjusted earnings in the range of $1.85-$2.05 per share.
Delta’s liquidity position is encouraging. The airline ended second-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.
Highlighting its pro-investor attitude, DAL’s management resumed paying quarterly dividends this year after a COVID-induced hiatus. This resumption is indicative of Delta's progress on its three-year financial plan (which includes debt repayment of more than $10 billion in the last two years).
Key Risks
The current scenario of rising fuel costs does not bode well for the airline. The northward movement in crude price is primarily due to the extension of production cut by Saudi Arabia and Russia through the end of the current year. For third-quarter 2023, Delta now anticipates average fuel cost per gallon in the $2.75-$2.90 band (prior view: $2.50-$2.70).
Apart from rising fuel expenses, DAL is also burdened with expenses related to non-fuel unit costs. Non-fuel unit cost or cost per available seat mile (CASM: adjusted) for the September quarter is now expected to increase 1-2% (earlier estimate was a 1-3% decline) from third-quarter 2022 actuals. The uptick in non-fuel unit costs is due to higher-than-expected maintenance costs.
Gradual improvement in the North American railcar leasing market is aiding GATX’s top line. Demand for the majority of railcar types in GATX's fleet remains robust, and absolute lease rates have been increasing.
We are also impressed with GATX's measures to reward its shareholders through dividends and buybacks, despite the current uncertainty. GATX has surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters (missing the mark in the other one). The average beat is 17.3%.
CVLG offers a portfolio of transportation and logistics services including asset-based expedited, dedicated and irregular route truckload capacity, asset-light warehousing, transportation management and freight brokerage capability.
CVLG’s cost-control efforts are commendable. The Zacks Consensus Estimate for 2023 earnings has revised 7.44% upward in the past 60 days.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Here's Why Investors Should Retain Delta (DAL) Stock Now
Delta Air Lines (DAL - Free Report) is benefiting from improved air-travel demand and shareholder-friendly stance. However, escalating fuel costs are worrisome.
Factors Favoring DAL
Continued recovery in air-travel demand, particularly on the domestic front, bodes well for Delta. DAL anticipates third-quarter 2023 adjusted earnings in the range of $1.85-$2.05 per share.
Delta’s liquidity position is encouraging. The airline ended second-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.
Highlighting its pro-investor attitude, DAL’s management resumed paying quarterly dividends this year after a COVID-induced hiatus. This resumption is indicative of Delta's progress on its three-year financial plan (which includes debt repayment of more than $10 billion in the last two years).
Key Risks
The current scenario of rising fuel costs does not bode well for the airline. The northward movement in crude price is primarily due to the extension of production cut by Saudi Arabia and Russia through the end of the current year. For third-quarter 2023, Delta now anticipates average fuel cost per gallon in the $2.75-$2.90 band (prior view: $2.50-$2.70).
Apart from rising fuel expenses, DAL is also burdened with expenses related to non-fuel unit costs. Non-fuel unit cost or cost per available seat mile (CASM: adjusted) for the September quarter is now expected to increase 1-2% (earlier estimate was a 1-3% decline) from third-quarter 2022 actuals. The uptick in non-fuel unit costs is due to higher-than-expected maintenance costs.
Zacks Rank
DAL currently carries Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks for investors interested in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) and Covenant Logistics Group (CVLG - Free Report) . GATX and CVLG currently carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Gradual improvement in the North American railcar leasing market is aiding GATX’s top line. Demand for the majority of railcar types in GATX's fleet remains robust, and absolute lease rates have been increasing.
We are also impressed with GATX's measures to reward its shareholders through dividends and buybacks, despite the current uncertainty. GATX has surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters (missing the mark in the other one). The average beat is 17.3%.
CVLG offers a portfolio of transportation and logistics services including asset-based expedited, dedicated and irregular route truckload capacity, asset-light warehousing, transportation management and freight brokerage capability.
CVLG’s cost-control efforts are commendable. The Zacks Consensus Estimate for 2023 earnings has revised 7.44% upward in the past 60 days.