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Here's Why Investors Should Avoid Delta (DAL) Stock Now
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Delta Air Lines (DAL - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 18.64% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 8.79% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: Delta currently carries a Zacks Rank #5 (Strong Sell). Moreover, the company’s current Momentum Style Score of C shows its short-term unattractiveness.
Unimpressive Price Performance: DAL shares have lost 9.4% over the past month compared with its industry’s 4% decline.
Image Source: Zacks Investment Research
Other Headwinds: The increase in oil prices is not a welcome development for Delta. This northward movement in crude price is primarily due to the extension of production cut by Saudi Arabia and Russia through the current-year end. We expect high fuel costs to have dented DAL’s bottom-line performance in the September quarter. Detailed results will be out on Oct 12.
For third-quarter 2023, Delta expects average fuel cost per gallon in the $2.75-$2.90 band. Our estimate is pegged at $2.83 per gallon.
Additionally, DAL is burdened with expenses on the non-fuel front. Non-fuel unit cost 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 is due to higher-than-expected maintenance expenses
Bearish Industry Rank: The industry, to which DAL belongs, currently has a Zacks Industry Rank of 225 (of 250 plus groups). Such an unfavorable rank places DAL in the bottom 10% of the 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.
For third-quarter and 2023, the Zacks Consensus Estimate has surged 248.15% and 148% over the past 60 days, respectively.
Ryder, which currently carries a Zacks Rank #2, is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.
Despite weak market conditions, Ryder reported better-than-expected earnings in second-quarter 2023. In fact, the company has an impressive earnings surprise history. R has surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark once), the average beat being 11.2%.
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Here's Why Investors Should Avoid Delta (DAL) Stock Now
Delta Air Lines (DAL - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 18.64% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 8.79% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: Delta currently carries a Zacks Rank #5 (Strong Sell). Moreover, the company’s current Momentum Style Score of C shows its short-term unattractiveness.
Unimpressive Price Performance: DAL shares have lost 9.4% over the past month compared with its industry’s 4% decline.
Image Source: Zacks Investment Research
Other Headwinds: The increase in oil prices is not a welcome development for Delta. This northward movement in crude price is primarily due to the extension of production cut by Saudi Arabia and Russia through the current-year end. We expect high fuel costs to have dented DAL’s bottom-line performance in the September quarter. Detailed results will be out on Oct 12.
For third-quarter 2023, Delta expects average fuel cost per gallon in the $2.75-$2.90 band. Our estimate is pegged at $2.83 per gallon.
Additionally, DAL is burdened with expenses on the non-fuel front. Non-fuel unit cost 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 is due to higher-than-expected maintenance expenses
Bearish Industry Rank: The industry, to which DAL belongs, currently has a Zacks Industry Rank of 225 (of 250 plus groups). Such an unfavorable rank places DAL in the bottom 10% of the 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.
Key Picks
Some better-ranked stocks for investors interested in the Zacks Transportation sector are SkyWest (SKYW - Free Report) and Ryder System (R - Free Report) .
SkyWest, which presently carries a Zacks Rank #2 (Buy), is benefitting from upbeat air-travel demand. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For third-quarter and 2023, the Zacks Consensus Estimate has surged 248.15% and 148% over the past 60 days, respectively.
Ryder, which currently carries a Zacks Rank #2, is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.
Despite weak market conditions, Ryder reported better-than-expected earnings in second-quarter 2023. In fact, the company has an impressive earnings surprise history. R has surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark once), the average beat being 11.2%.