NEW YORK (TheStreet) -- Delta Air Lines (DAL) shares are up 0.7% to $43.24 in morning trading on Tuesday after the airline was mentioned in an analyst note this morning picking the top four stocks in the airline industry.
Analysts at Morgan Stanley picked Delta as one of the industry's top four stocks while initiating coverage with an "overweight" rating and $65 price target.
The price target represents a potential 50.3% upside from the stock's current price.
"Delta is one of the more attractive airlines within our coverage universe as it provides investors a very balanced profile between its mid-teens free cash flow yield, billions of dollars in capital returns, a move towards an investment grade balance sheet, and a variablized cost structure," said the firm.
The other top three airlines were United Continental (UAL), Alaska Air Group (ALK) and Spirit Airlines (SAVE).
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