NEW YORK (TheStreet) -- Shares of Delta (DAL - Get Report) closed up by 3.59% to $40.98 on Thursday, as the company reported mixed 2016 second-quarter results, CNBC's Melissa Lee reported on "Power Lunch" today.
Delta plans to cut the number of flights travelling between the U.S. and the U.K. during the winter due to the Brexit and the recent drop in the value of the British pound, Lee said.
The stock is moving higher because the company guided below what was expected and adjusted the back half capacity of 2016, which will make it easier for it to improve in the fourth quarter and 2017, Janus Capital energy and airlines buy side analyst Chris Kelly said on "Power Lunch".
The company's revenue environment remains challenging with persistent headwinds, domestic yields, geopolitical uncertainty, Delta said.
The reason to buy shares of Delta is due to its six and half times earnings, it had a 5% free cash flow yield in the second-quarter, it brought back $1.2 billion of stock, and will return $3.5 billion to shareholders this year, Kelly said.
There's not many companies in the industrial and transport industry in the world that can do that.
"I agree with you 100% that the call was pretty negative. But things have been pretty negative for a year, maybe a little bit more than a year," he said.
Oil prices have been down which means low costs for Delta and the demand for travel has been high, yet Delta's stock is closer to 52 week lows than 52 week highs, Kelly added.
People sold their shares of Delta because the prices have been low for over 12 months now. Shareholders were afraid that airlines would compete away all of the profits that the company earned, he said.
"We don't think profits are going to zero. We don't even think they're going to get cut in half from here," Kelly said.
Separately, TheStreet Ratings team set this stock as a "buy" with a ratings score of B. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. TheStreet Ratings team feels its strengths outweigh the fact that the company shows weak operating cash flow.
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
You can view the full analysis from the report here: DAL