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Airline Stocks: 2 to Book, 2 to Bump

Some airline stocks will keep soaring, but others will run out of fuel

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Book: Delta Air Lines (DAL)

airline-stocks-dal-stockIt’s clear that Delta Air Lines (DAL) CEO Richard Anderson has DAL firing on all thrusters. Last month, Delta reported earnings of 65 cents per share for the quarter — more than double the 28 cents per share it reported a year earlier, on revenue of $9.08 billion. Those numbers beat the Street on the top and bottom lines.

Looking ahead to the next quarter, DAL expects to expand margins between 6-8%; the airline also expects to boost PRASM by 3-4% in the current quarter. The company’s strategy has been a productive mix of fare and ancillary fee hikes, capacity planning and unconventional approaches to reducing jet fuel costs.

The Pennsylvania oil refinery DAL purchased in 2012 finally turned a tiny profit in the third quarter of last year — the company believes that refining lower cost Bakken crude into jet fuel will help the refinery turn solidly to the black in 2014.

Delta shares have gained 117% over the past year — an amazing run, even among airline stocks — which will give new investors pause.  However, DAL is still trading at less than 10x forward earnings and has a PEG ratio of 0.8, indicating it could be slightly undervalued.

Article printed from InvestorPlace Media,

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