Here's Why Investors Should Avoid Delta (DAL) Stock Now
Delta Air Lines DAL is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 18.64% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 8.79% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: Delta currently carries a Zacks Rank #5 (Strong Sell). Moreover, the company’s current Momentum Style Score of C shows its short-term unattractiveness.
Unimpressive Price Performance: DAL shares have lost 9.4% over the past month compared with its industry’s 4% decline.
Image Source: Zacks Investment Research
Other Headwinds: The increase in oil prices is not a welcome development for Delta. This northward movement in crude price is primarily due to the extension of production cut by Saudi Arabia and Russia through the current-year end. We expect high fuel costs to have dented DAL’s bottom-line performance in the September quarter. Detailed results will be out on Oct 12.
For third-quarter 2023, Delta expects average fuel cost per gallon in the $2.75-$2.90 band. Our estimate is pegged at $2.83 per gallon.
Additionally, DAL is burdened with expenses on the non-fuel front. Non-fuel unit cost for the September quarter is now expected to increase 1-2% (earlier estimate was a 1-3% decline) from third-quarter 2022 actuals. The uptick is due to higher-than-expected maintenance expenses
Bearish Industry Rank: The industry, to which DAL belongs, currently has a Zacks Industry Rank of 225 (of 250 plus groups). Such an unfavorable rank places DAL in the bottom 10% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Key Picks
Some better-ranked stocks for investors interested in the Zacks Transportation sector are SkyWest SKYW and Ryder System R.
SkyWest, which presently carries a Zacks Rank #2 (Buy), is benefitting from upbeat air-travel demand. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For third-quarter and 2023, the Zacks Consensus Estimate has surged 248.15% and 148% over the past 60 days, respectively.
Ryder, which currently carries a Zacks Rank #2, is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.
Despite weak market conditions, Ryder reported better-than-expected earnings in second-quarter 2023. In fact, the company has an impressive earnings surprise history. R has surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark once), the average beat being 11.2%.
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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
Ryder System, Inc. (R) : Free Stock Analysis Report
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
