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Here's Why You Should Steer Clear of Delta (DAL) Stock Now

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While designing the portfolios, investors solely aim at raking in handsome returns. Hence, they prefer adding the well-performing stocks to their portfolios and get rid of the underperformers.

One such stock that investors would do well to avoid for the time being is Delta Air Lines (DAL - Free Report) . We’ll tell you why.

Multiple Headwinds Hurting the Stock

Delta, like its peers such as United Continental Holdings (UAL - Free Report) , had to cancel multiple flights due to the natural calamities Harvey and Irma. Consequently, third-quarter results are likely to be hurt by the hurricanes.

Earlier in September 2017, Delta gave a bearish view for the third quarter due to  higher fuel costs and soft yields. The Atlanta, GA-based company now anticipates passenger unit revenue for the said quarter to increase in the band of 2-3% compared with the previous guidance of 2.5-4.5%. Operating margin is expected to improve in the range of 16.5-17.5% than 18-20%, projected earlier.

Moreover, Delta expects fuel prices per gallon between $1.68 and $1.73 compared with $1.55 and $1.60 band, guided earlier. The uptick was driven by an increase in market price that began in late July.

Apart from high fuel costs, expenses on the labor front are also likely to limit bottom-line growth in the third quarter. In fact, labor costs have spiked as the company inked multiple labor deals. Meanwhile, high labor costs have been hurting the company for quite some time and the third quarter is likely to be no different.

Certainly Not a Broker Favorite

Given the challenges faced by the company, it is natural that the stock is not a favorite of brokers right now. The stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised 11.1% downward over the last 30 days.

Furthermore, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions, given the wealth of information at the disposal of brokers. Markedly, the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.

Additionally, Delta’s Momentum Score of F highlights its short-term unattractiveness.

Price Performance

Shares of Delta have struggled so far this year due to the above headwinds. Consequently, the stock has underperformed its industry on a year-to-date basis. The stock has been down 2.1%, as against the industry’s gain of 8.6%.

In Conclusion

Taking into account the above-mentioned headwinds and the unfavorable readings, we advise investors to avoid the stock at the moment. The Zacks Rank #5 (Strong Sell) carried by the stock also suggests the same.

Stocks to Consider

Some better-ranked stocks in the same space that the investors can consider are Ryanair Holdings (RYAAY - Free Report) and GOL Linhas Aéreas Inteligentes S.A. (GOL - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ryanair has witnessed the Zacks Consensus Estimate for current-year earnings being revised 3.2% upward over the last 60 days.

GOL Linhas’ stock price has increased more than 70% over the last six months.

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