A 'Well-Managed' Airline: Argus Reiterates Buy On Delta

Delta Air Lines, Inc. DAL reported 2Q earnings ahead of the consensus estimate. Argus’s David Coleman reiterated a Buy rating on Delta, with a price target of $60, saying that the company was benefiting from solid industry fundamentals, including “relatively low fuel costs, moderate capacity growth, and rising demand for air travel.”

Delta has been upgrading its fleet with new, fuel-efficient aircraft, while adding to its route network and expanding globally through partnerships with international carriers. Analyst David Coleman expects these initiatives to result in the company generating stronger results over time. He expressed optimism regarding continued returns of capital to shareholders through dividend hikes and share buybacks.

2Q Results

Delta reported its 2Q adjusted EPS at $1.47, up from $1.27 in 2Q15 and higher than the consensus estimate by $0.05. EPS growth was achieved through share buybacks and cost reductions, Coleman noted. Revenue came in at $10.4 billion, down 2.4 percent y/y, while passenger revenue per available seat mile fell 4.9 percent.

Delta’s shares have lost 18 percent over the past three months, versus a 3.4 percent gain in the S&P 500. Over the past year, Delta’s shares have declined 6.8 percent, compared to a gain of 3.6 percent for the index.

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