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Delta (DAL) Still a "Buy", Says TheStreet

Tickers in this article: DAL

NEW YORK (TheStreet) -- TheStreet Ratings team rates Delta Air Lines as a Buy with a ratings score of B.

By market close Tuesday, shares jumped 3.2% to $31.91, adding to an overall 16.2% gain over the year to date.

In company news, last week the airline announced plans to spend $770 million through 2016 refurbishing its aircraft fleet.

The Atlanta-based business said it would focus on refreshing the interiors of its narrow-body craft, Boeing 757-200, 737-800, Airbus A319 and A320 airplanes. Refurbishments include offering power outlets in each seat, updating bathrooms and adding more efficient galleys.

"We're continuing to make smart long-term investments in our products and services to meet the expectations of our customers," said Chief Revenue Officer Glen Hauenstein in a statement.

The investment is in line with Delta's strategy to improve all its flights. By mid-2014, Delta plans to have full flat-bed seats and direct-aisle access in its BusinessElite class in international wide-body aircraft and Wi-Fi access in its entire international fleet by 2015.

In other news, recent Federal reports rank Delta as the third-highest airline in terms of on-time flights, with an 88.3% on-time rate. Hawaiian Airlines ranked first with a rate of 93.9% on-time flights and Frontier Airlines came in last at 78.6%.

TheStreet Ratings Team has this to say about their recommendation:

"We rate DELTA AIR LINES INC (DAL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, solid stock price performance, impressive record of earnings per share growth and revenue growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Airlines industry and the overall market, DELTA AIR LINES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 150.75% to $1,161.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 133.56%.
  • Powered by its strong earnings growth of 29.26% and other important driving factors, this stock has surged by 136.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DAL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DELTA AIR LINES INC has improved earnings per share by 29.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DELTA AIR LINES INC increased its bottom line by earning $1.19 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus $1.19).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.