Delta Air Lines Share Price Gains 25% From Recent Low

Delta Air Lines, Inc. (NYSE:DAL) recovered most of its share price losses since its all-time high in November 2018 and looks to continue its uptrend on positive financial results for the first quarter 2019.

The company’s share price experienced some volatility over the past five years. However, except for a 30%-plus drop in 2016, the share price rode an overall uptrend until the last quarter of 2018. After another significant pullback — 25% in two months — the share price bounced back quickly and regained more than three-quarters of those losses in the first quarter 2019.

The decline in late-2018 pushed the 50-day moving average below the 200-day average in early January. However, the strong share price recovery in 2019 pushed the 50-day average upwards and the average has been rising sharply since the beginning of March 2019. While still below the 20-day average, the 50-day average is rising and has cut the gap to the 200-day average in half since the first week of March. If the current trend continues, the 50-day moving average could break back above the 200-day average in a bullish manner by the end of April, if not sooner.

Delta’s current share price has at least 11% room on the upside before it reaches Wall Street analysts’ average target price of $64.71. Because of this growth room and the anticipation that Delta will build on its year-end results with another better-than-expected financial report for the first quarter, all analysts currently covering the Delta stock have a “Buy” (11) or a “Strong Buy” (7) recommendation.

Financial Results

On January 15, 2019, Delta Air Lines reported a pre-tax income of $1.3 billion and a net income of $1 billion, which translated to a $1.49 earnings per diluted share. On an adjusted basis, the pre-tax income was $1.2 billion and net earnings were $890 million, or $1.30 per diluted share. The earnings per share (EPS) were 42% higher year-over-year, as well as 2.3% above analysts’ earnings expectations of $1.27.

For the full year, adjusted pre-tax income was $5.1 billion. Adjusted EPS increased 19% from the previous year to $5.65. A portion of the increase was driven by a 4% reduction in common share count from the share repurchase program in 2018. In 2018, the company returned to shareholders $2.5 billion through share repurchases and dividend distributions.

Delta provided a first-quarter EPS guidance of $0.70 to $0.90. The analyst’s current EPS expectations of $0.89 are on the high end of that range. However, based on positive developments, Delta has raised its earnings forecast to between $0.85 and $0.95. The company will report the first-quarter results on April 10, 2019, at 10:00 a.m. ET.

Delta Air Lines, Inc. (NYSE:DAL)

Headquartered in Atlanta, Georgia, and founded in 1924, Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo internationally. Delta Air Lines serves more than 180 million customers each year. Through its global network, Delta and the Delta Connection carriers offered service to more than 300 destinations in over 57 countries and operated a fleet of more than 800 aircraft as of March 2019. The airline is a founding member of the SkyTeam global alliance and participates in the industry’s leading transatlantic joint venture with Air France-KLM and Alitalia, as well as a joint venture with Virgin Atlantic. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily flights and services 660 locations in 130 countries. The company’s key hubs and markets are Amsterdam, Atlanta, Boston, Detroit, Los Angeles, Mexico City, Minneapolis/St. Paul, New York-JFK and LaGuardia, London-Heathrow, Paris-Charles de Gaulle, Salt Lake City, São Paulo, Seattle, Seoul and Tokyo-Narita.

Dividends

The company has boosted its annual dividend every year since starting distributions in 2013. Over the past six years, Delta enhanced its total annual dividend payout amount nearly six-fold. That pace of dividend advancement corresponds to an average growth rate of 34.2% per year.

The company’s current quarterly payout of $0.35 amount is 14.8% higher than the $0.305 dividend distribution from the same period last year. This new quarterly dividend amount corresponds to a $1.40 annualized payout and a 2.4% forward dividend yield. The current yield is nearly 52% higher than Delta’s own 1.6% average yield over the past five years.

In addition to outperforming its own average, Delta’s currently 2.4% yield is 27% higher than the 1.91% average yield of all the companies in the Services sector. Furthermore, Delta’s current yield is also double the 1.2% simple average yield of the Airlines industry segment. Also, Delta’s 2.4% yield is even one-third higher than the 1.82% simple average yield of the Airlines industry segment’s only dividend-paying companies.

Share Price

The company’s share price entered the trailing 12-month period on an overall rising trend. Despite the overall uptrend, the share price experienced increased volatility over the past five years. After a couple of swings of more than 10% in the first half of 2018, the share price managed to reach its new all-time high of $60.71 on November 30, 2018.

However, the share price changed direction and immediately plunged 25% toward its 52-week low of $45.61 on January 3, 2019. Fortunately, the share price resumed its uptrend and started recovering right away. The recovery began slowly but then surged in April 2019 and the share price already recovered 80% of its losses from the last quarter 2018. The share price closed on April 9, 2019, at $57.71. That closing price was less than 5% below the all-time peak from November 2018 and nearly 10% higher than it was one year earlier. Additionally, the April 8 closing price was also 26.5% above the January low and more than 70% higher than it was five years ago.

The robust asset appreciation combined with the company’s above-average dividend income rewarded Delta’s shareholders with a 12.5% total return on investment over the past 12 months. Longer term benefits were even better with a 32% total return over the past three years, as well as a total return of 84% over the last five years.

Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.