NEW YORK (TheStreet) --Shares of Delta Airlines (DAL) are higher by 1.86% to $42.77 in mid-morning trading on Monday, following a report by Barron's released over the weekend stating shares of the U.S.'s top four carries could rise 15% to 50% in a year.
Lower fuel costs and a lack of competition is what led to the publication's forecast.
At the end of June 2014, prior to the drop in oil prices, Wall Street had estimated that the four carriers would grow their combined EBITDA by 7% to $22.7 billion. The current forecast is for a growth of 40% to $29.2 billion, Barron's said.
Factors working in Delta's favor include its position in Atlanta, one of the most advantageous flight markets, it is facing less low-fare competition than its peers, its ability to generate good deals on aircrafts, and its plan to cut back on small planes, Barron's noted.
Separately, 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, growth in earnings per share, increase in net income and increase in stock price during the past year. 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 3.1%. 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.
- 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 ($4.50 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 average is still marginally south of the industry average growth rate of 74.17%.
- After a year of stock price fluctuations, the net result is that DAL's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
- 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