Morgan Stanley Maintains on Delta Air Lines
In a report published Wednesday, Morgan Stanley analyst John Godyn maintained Overweight on Delta Air Lines (NYSE: DAL), with a NA price target, as 4Q13 peak margins look possible.
According to the report, 4Q13 adjustments of EPS of $0.65 beat consensus of $0.63 but was slightly below the analyst's $0.67 estimate. 1Q14 op. margin guidance of ~7% compares favorably to their model, which was already above consensus. Thus, guidance implies upside to 1Q14 consensus EPS to the ~$0.28 range.
“DAL reiterated its goal to reach an annual op. margin of 10-12%, a level we believe is attainable due to a combination of (A) leverage to a Stronger For Longer cycle and (B) the various sources of DAL-specific alpha we've highlighted in the past (see DALpha Deja Vu 10/3/13),” the report noted. “Though DAL mgmt was reluctant to declare an outright return to prior peak margins, which are north of 12%, mgmt made clear that the combination of increased concentration, higher fuel prices and a different financing environment support the case for continued margin expansion from here even without a meaningful reacceleration in real GDP.”
DAL closed Tuesday at $32.08.
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