Delta Air Lines (DAL) Stock Plunging on Higher Oil Prices, Negative Travel Industry Report

NEW YORK (TheStreet) -- Shares of Delta Air Lines (DAL) are plunging 4.41% to $44.17 in Tuesday's afternoon trading due to higher oil prices today.

Following two days of decline, oil prices rose after Japan, one of the major importers of crude oil, announced that its economy was strengthening, surprising markets. Similarly, improving consumer confidence in Australia led to renewed hope that demand for oil may begin to increase, Reuters reported.

Crude prices have also risen on expectations that the U.S. oil boom will slow down and bring the oversupplied global market into balance, The Wall Street Journal reported.

With higher oil prices negatively impacting airline stocks, Delta has also been getting heat elsewhere. A group of travel websites including TripAdvisor (TRIP), Hipmunk and ChipOair alleged the carrier cut them and their users off from its data, according to a report released on Wednesday by the Travel Technology Association.

Released by the industry's trade group, the report states that Delta's move is part of a broader push by airlines to restrict how travel websites can use their fare and schedule information. For example, carriers like American Airlines Group (AAL) and United Continental Holdings (UAL) have already adopted policies recently to restrict others from using their flight information.

Citing concerns about how pulling data from the travel websites would affect the way consumers shop for flights on the Internet, the association said that approximately 44% of travelers booking through online sources typically shop at an online travel agency website or a meta search travel site to compare different prices and schedules.

"Travelers benefit greatly from aggregation and display of comparative airline information because it enables them to shop quickly and easily for flights across most carriers," the association said.

Delta has said that it never authorized these sites to use its data, Fortune reported.

The Travel Technology Association is asking the Transportation Department to review its report and decide if carriers should be required to make their information available to all sites.

Going forward, the carrier told The Wall Street Journal that it would "continue partnering with a limited, but responsive and adaptable group of online retailers."

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 99.76%.
  • 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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