Delta Air Lines (DAL) Stock Declines as Oil Prices Rally

NEW YORK (TheStreet) -- Delta Air Lines (DAL) shares are down 1.26% to $46.22 in afternoon trading on Tuesday as rising oil prices take their toll on the airline sector today.

Airline stocks have been tied to the performance of oil in recent sessions as falling crude prices mean cheaper jet fuel for the airline industry.

Oil prices rallied in trading today after experiencing declines in the previous session after the U.S. Energy Information Administration released a report suggesting that output from seven major shale plays will see an 86,000 barrel reduction in daily output in June.

Industry analysts outside of the government are forecasting daily output from the shale plays to decrease by 57,000 barrels next month.

Industry standard Brent crude for June delivery is up 2.76%, or $1.79, to $66.70 per barrel, while U.S. West Texas crude is up 2.26%, or $1.34, to $60.59 per barrel in trading today.

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

"We rate DELTA AIR LINES INC (DAL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, growth in earnings per share and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • DAL's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 5.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • DELTA AIR LINES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DELTA AIR LINES INC reported lower earnings of $0.75 versus $12.29 in the prior year. This year, the market expects an improvement in earnings ($4.65 versus $0.75).
  • Net operating cash flow has significantly increased by 72.02% to $1,636.00 million when compared to the same quarter last year. Despite an increase in cash flow, DELTA AIR LINES INC's cash flow growth rate is still lower than the industry average growth rate of 99.28%.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Airlines industry average, but is greater than that of the S&P 500. The net income increased by 250.2% when compared to the same quarter one year prior, rising from $213.00 million to $746.00 million.
  • You can view the full analysis from the report here: DAL Ratings Report
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