Delta Airlines, Inc. (NYSE:DAL) beat analysts expectations in Q4, and all signs point to a strong 2015 as well. The only thing that could hamstring Delta Airlines momentum is weather.
If there’s a stormy end to winter, planes get stacked up (with passengers), and the complex choreography of moving passengers and airplanes around the world in an efficient and timely fashion becomes significantly more complicated. And costly.
For example, the last nor’easter that blew down the New England coast cancelled 7000 flights in a two day span, domestic and international. And once the skies open again, you have to move all those backed up passengers with the passengers that have current bookings. Plus, Delta Airlines is not receiving revenue from freight or passengers.
But, that’s about the only thing standing in DAL stock’s way.
Short positions against DAL stock are dwindling. Low fuel prices mean Delta is likely to save $2 billion this year over 2014 just in filling up its fleet.
Delta’s CEO Richard Anderson said he expects “double-digit earnings growth, along with increased free cash flow and a higher return on invested capital in the upcoming year.”
It’s also looking like DAL’s 49% stake in Virgin Atlantic Airways Limited is going to start paying off soon as well. Singapore Airlines bought the stake in 1999 for $1 billion as Virgin was struggling to live up to its trailblazing reputation it had established years earlier. But then the airline industry sank into a deep bear market.
DAL bought the stake in 2012 for $360 million and installed a former American Airlines Group Inc (NASDAQ:AAL) veteran as CEO. Virgin is now on the verge of becoming profitable again and Delta has merged operations quite successfully. This is a long-term benefit to Delta since a healthy Virgin means top line and bottom line growth for DAL stock.
DAL continues to cut its debt — down $10 billion since 2009, and cut its debt payments 50% — which will continue to boost its free cash flow. Savings from lower fuel prices will also be a boon to the bottom line.
The caveat to all this good news is analysts may get a bit too optimistic and set expectations too high. Or world events may intercede and oil prices could spike, eroding projected cost savings and subduing travel.
Some of these caveats and the fact airline stocks can be notoriously hot and cold are the reasons DAL stock scores a B rating on Portfolio Grader. However, Delta has come a long way in the past few years and built a solid track record during difficult times. Plus, now demand is rising around the globe, and things are looking better.
So at this point, it’s wheels up for DAL stock, a solid long-term buy.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
