This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Delta Woos Investors Back to Airlines

ATLANTA ( TheStreet) -- Analysts are applauding Delta's (DAL - Get Report) move to fashion a new model of an airline that can compete for investor dollars.

The carrier said Wednesday it will restore its dividend, repurchase shares, continue to reduce debt and carefully manage capital expenditures, prompting JP Morgan analyst Jamie Baker to write in a report Wednesday that "any deployment of cash that benefits stakeholders and leaves less for manufacturers and pilots to pursue must be viewed positively."

Delta shares gained 3% from Tuesday's close, closing Wednesday at $18.66. For the full year, Delta shares are up 54%, while the Arca Airline Index (XAL) is up 28%. Analysts cheered Delta's commitment in a series of reports issued late Wednesday and early Thursday.

"We view the capital return plan as further evidence of Delta's leadership among legacies," wrote Imperial Capital analyst Bob McAdoo. "We believe Delta will be successful in appealing to a broader group of investors as it solidifies its track record of producing mid to high single digit pre-tax margins." McAdoo raised his target price to $23 from $20, saying "the company's meaningful dividend merits a premium valuation among its peers."

Baker called Delta's strategy a "Southwestification" of Delta's shareholder base, saying that it presages a change from an ownership model that has 25% of Delta equity owned by hedge funds, five times the hedge fund ownership of both Southwest (LUV - Get Report) and the Dow Jones Transportation Index.

It is likely that more institutions would buy shares in an airline that offers "double-digit annual operating margins, respectable ROIC, quarterly profitability, a strong balance sheet, healthy buyback activity and a dividend to boot," said Baker, who noted that qualities "were traditional hallmarks of the Southwest investment thesis, but looking forward, we see Delta increasingly offering many of the very attributes Southwest once monopolized."

Other airlines will likely follow Delta's lead. "The announcement sends a very clear message that Delta (and its brethren competitors) are serious about transforming the U.S. airline industry into the investable sector it once was decades ago," said Deutsche Bank's Michael Linenberg, who has a $20 price target.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
LCC $0.00 0.00%
DAL $44.96 -1.32%
LUV $44.30 -0.63%
AAPL $124.43 -1.54%
FB $82.22 -1.18%


DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs