IBD Stock Analysis
- It is trading tight below 39.72 entering a flat handle.
Ranking by industry group
An emerging pattern
Mug with a handle
* Not real time data. All data shown was captured at 14:02 EST on 02/01/2023.
Delta Air Lines (DAL) is the IBD Stock of the Day for Wednesday. Delta Air Lines expects strong growth in 2023 as the recovery in the travel market continues. DAL shares rose on Wednesday as traders digested the day’s news from the Federal Reserve.
Despite some severe weather and technology disruptions during the holiday season, air travel rebounded in 2022. This momentum is expected to continue into 2023. The World Economic Forum predicts that North American airlines will fully recover to their prior passenger levels the pandemic by the end of the year.
“The environment in the air travel industry remains favorable and Delta is well positioned to deliver significant earnings and cash flow growth,” Delta CEO Ed Bastian said during the company’s fourth quarter earnings results on Jan. 13.
For the quarter, Delta Air Lines’ earnings jumped 573% to $1.48 a share and revenue jumped 42% to $13.44 billion. That slightly beat Wall Street estimates for earnings per share of $1.32 on a 36% rise in revenue to $12.92 billion. The results marked three quarters of revenue growth and six consecutive quarters of sales growth.
For fiscal 2023, Delta forecast a “significant” rise in earnings to $5 to $6 per share, from $3.20 in 2022. Revenue is expected to rise 15% to 20%, to a range of $52.44 billion to $54. 72 billion. FactSet analysts expected a 64% rise in earnings to $5.26 per share on $53.49 billion in revenue.
However, Delta tempered expectations by forecasting unit fuel costs and labor costs to increase in the first quarter. Delta guided for Q1 earnings in a range of 15 cents to 40 cents per share, versus Wall Street estimates of 59 cents.
Still, Delta shares are up nearly 14% over the past month and 22% over the past three months. Aerial opponent American Airlines (AAL) is up roughly 20% over the same two periods.
Meanwhile, United Airlines (UAL) jumped 23% and 19.5% over the past month and the past three months, respectively. Shares of Southwest Airlines ( LUV ), which had a massive computer failure that grounded thousands of flights in December, rose just 5.3% in January. LUV shares have lost 3% over the past three months.
Delta Air Lines ranks second in the Transportation-Airline group, according to IBD Stock Checkup, trailing only Panama City-based Copa Holdings (CPA).
DAL burst from a tight handle for its base with a handle cup. The current 40-week pattern has a 39.72 buy point, according to MarketSmith. Delta shares are moving just above their short-term 10-day moving average. The cup-handled buy zone that extends 5% beyond the buy point extends to 41.70.
Delta’s relative strength line has fallen from its mid-January highs and the stock currently has a 77 RS rating. The airline’s earnings improvement gives Delta stock an EPS rating of 82. And the stock has a 95 Composite Rating out of a best possible 99. The Composite Rating combines a number of technical indicators into one easy-to-read score.
DAL stock was added to SwingTrader’s short trades list on Wednesday. Delta shares rose 2% on Wednesday.
You can follow Harrison Miller for more stock market news and updates on Twitter @IBD_Harrison
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