Delta Reaches New 52-Week High - Analyst Blog

Shares of leading passenger and cargo carrier, Delta Air Lines Inc. DAL hit a new 52-week high of $42.35 on June 4, 2014. However the company ended yesterday's trading session a trifle lower at $42.17, reflecting a solid 140% return over the past 12 months.

For 2014, Delta is committed to improve its operational performance and margins, besides making balanced capital deployment to increase shareholder returns. The company managed to reduce its net debt to $9.1 billion at the end of first-quarter 2014, and is planning to lower it further to $7 billion in the next two years.

Delta is also progressing well on improving ancillary revenues by adding better features to its services as well as introducing products to enhance passenger satisfaction and experience, both in air and on ground. In an attempt to enhance its fleet structure, amenities, products and technological base, Delta aims to invest $2.0–$2.5 billion annually, over the next five years.

So far this year, the company's shares have soared more than 52%. Acquisitions and mergers have played a major role in shaping Delta's success story. In June 2013, Delta completed the acquisition of a 49% stake in British carrier Virgin Atlantic from Singapore Airlines, following approvals from the U.S. Department of Justice and the European Commission. Both airlines have agreed on a code-sharing deal across 108 routes connecting 66 destinations across North America and the U.K.

Notably, in the past one year, Delta has reported impressive quarterly numbers. In all of the last four quarters, the company has surpassed the Zacks Consensus Estimate, with an average earnings beat of 6.3%, including a positive surprise of 13.8% in the previously concluded quarter. In the past 60 days, the company has witnessed upward earnings estimate revisions for the current year leading to the Zacks Consensus Estimate moving up by 14.2% to $2.97.

Going ahead, we expect Delta to perform impressively on various strategic measures such as solid domestic demand, route launches, introduction of ancillary products, strong customer service and revamping of its fleet structure.

Delta Air Lines currently has a Zacks Rank #1 (Strong Buy). Some other airline stocks which warrant a look are Southwest Airlines Co. LUV, Alaska Air Group, Inc. ALK and American Airlines Group Inc. AAL. All these stocks sport a similar Zacks Rank #1.  

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