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Credit Suisse Positive On Delta, Calls Co. Ideal Entry Point For New Investors

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  • Delta Air Lines, Inc. (NYSE: DAL) shares have been on a downward trajectory and have lost 11 percent since December 21.
  • Credit Suisse’s Julie Yates maintained an Outperform rating for the company, with a price target of $65.
  • Delta has a clean story and is expected to be a unit revenue outperformer, Yates stated.

“Among network carriers, DAL remains our top pick as the cleanest story and the unit revenue outperformer,” analyst Julie Yates said. She commented further that Delta’s stock represented the “ideal entry point” into the airlines sector for newer investors, while adding that the stock was unlikely to underperform on a relative basis given the company’s consistent unit revenue performance.

Yates believes that Delta would be the second airlines to achieve positive PRASM, expected in 3Q of 2016, behind only Southwest Airlines Co (NYSE: LUV), which is expected to attain this in 2Q. Moreover, Delta continues to meet or beat the guidance and has healthy capital allocation.

The analyst mentioned that management could indicate its willingness to reduce capacity to the lower end of the 2016 capacity guidance of 1-2 percent, or cut down even further in order to continue with unit revenue improvements, now that fuel is 22 percent below what it was on December 17, 2015.

“At the investor day Delta noted for 2016 it would see a $3B tailwind at $40/bbl with a realized jet fuel price at the forward curve would be ~$1.45. Delta was 5% hedged for 2016 with ~90-100% downside participation to $40/bbl; at Dec 7 th the hedge loss for 2016 was expected to be ~$500M but there wasn’t much color on how this is spread through 2016,” the Credit Suisse report noted.

Latest Ratings for DAL

DateFirmActionFromTo
Apr 2018Morgan StanleyMaintainsOverweightOverweight
Apr 2018Morgan StanleyMaintainsOverweightOverweight
Mar 2018Morgan StanleyMaintainsOverweightOverweight

View More Analyst Ratings for DAL
View the Latest Analyst Ratings

Posted-In: Credit Suisse Julie YatesAnalyst Color Long Ideas Reiteration Analyst Ratings Trading Ideas

 

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