Is Delta’s Stock Ripe for Holiday Picking?

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With shares of Delta Air Lines (NYSE:DAL) trading around $9.72, is DAL a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Technicals on the Chart are Strong

As of November 20, the stock price was 6.15 percent below its 20-day simple moving average, or SMA; 3.64 percent above its 50-day SMA; and 7.55 percent below its 200-day SMA.

Since the beginning of 2012, the stock price has been in an upward trend, gaining 20.27 percent this year to date, and 34.12 percent year over year.

As CEO Richard Anderson said in the company’s third-quarter press release, “With a more stable financial foundation, we have moved our focus beyond short-term profit gains to positioning ourselves for long-term margin expansion, sustained profitability and shareholder returns.”

E = Earnings Are Increasing Quarter over Quarter

Delta’s revenue has grown steadily since 2007, although the rate of growth has slowed since 2009. Revenue grew a whopping 23.6 percent between 2008 and 2009 and dropped to 10.7 percent growth between 2010 and 2011.

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 19,154 22,697 28,063 31,755 35,176
Diluted EPS ($) 4.08 (19.08) (1.50) 0.70 1.01

Full-year 2012 earnings estimates clock in at $2.27 per share, with 2013 projects trending higher. Forgoing any fiscal-cliff related disasters or disaster in the European market, the worst looks to be behind for Delta and the industry.

The reliability of quarter-to-quarter revenue growth could better, but Delta has posted three consecutive quarters of increasing revenues. Unfortunately, earnings estimates for the current quarter are currently averaging $0.81 per share, a quarter-on-quarter decline but a year-over-year growth.

Quarter Sept. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 June 30, 2012 Sept. 30, 2012
Revenue ($) in millions 9,847 8,391 8,413 9,732 9,923
Diluted EPS ($) 0.65 0.50 0.15 (0.20) 1.23

Delta cancelled over 3,500 flights in October due to Hurricane Sandy, which the company reports negatively impacted revenues by $45 million and profit by $20 million. For the month of October, Delta reported a 0.3 percent year-over-year increase in revenue passenger miles, a basic measure of total traffic, and a 1.8 percent increase in available seat miles, a measure of airline capacity.

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