Why These Four Airlines are Cruising Lower on Wednesday

NEW YORK (TheStreet) -- United Continental (UAL), Southwest Airlines (LUV), Delta Air Lines (DAL) and JetBlue (JBLU) were cruising lower on Wednesday, putting a stopper on an industry rallying since the beginning of the year.

The likely culprit, oil prices jumped earlier in the day, a factor which will likely depress profitability among airlines. By late afternoon, West Texas Intermediate crude for delivery in February climbed 1.84% to $94.29 a barrel, while Brent crude was 0.68% higher to $107.11 a barrel.

Prices were higher after the U.S. Energy Administration reported crude supplies had dropped for the seventh week in a row. Since late November, crude-oil inventories have dropped around 41.2 million barrels. Also pushing prices higher, better-than-expected U.S. manufacturing data in the New York region indicated stronger demand for energy.

In Wednesday's afternoon session, United Continental dropped 1.1% to $46.24, Southwest was 1.5% lower to $21.10, JetBlue slipped 1.4% to $8.98, and Delta plunged 1.7% to $31.46.

TheStreet Ratings team rates DELTA AIR LINES INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate DELTA AIR LINES INC (DAL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, solid stock price performance, impressive record of earnings per share growth and revenue growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Airlines industry and the overall market, DELTA AIR LINES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 150.75% to $1,161.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 133.56%.
  • Powered by its strong earnings growth of 29.26% and other important driving factors, this stock has surged by 136.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DAL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DELTA AIR LINES INC has improved earnings per share by 29.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DELTA AIR LINES INC increased its bottom line by earning $1.19 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus $1.19).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.

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