Here's Why You Should Steer Clear Of Delta (DAL) Stock Now
Zacks Investment Research | Sep 21, 2017 09:27PM ET
While designing the portfolios, investors solely aim at raking in handsome returns. Hence, they prefer adding the well-performing stocks to their portfolios and get rid of the underperformers.
One such stock that investors would do well to avoid for the time being is Delta Air Lines (NYSE:DAL) . We’ll tell you why.
Multiple Headwinds Hurting the Stock
Delta, like its peers such as United Continental Holdings (NYSE:UAL) , had to cancel multiple flights due to the natural calamities Harvey and Irma. Consequently, third-quarter results are likely to be hurt by the hurricanes.
Earlier in September 2017, Delta gave a bearish view for the third quarter due to higher fuel costs and soft yields. The Atlanta, GA-based company now anticipates passenger unit revenue for the said quarter to increase in the band of 2-3% compared with the previous guidance of 2.5-4.5%. Operating margin is expected to improve in the range of 16.5-17.5% than 18-20%, projected earlier.
Moreover, Delta expects fuel prices per gallon between $1.68 and $1.73 compared with $1.55 and $1.60 band, guided earlier. The uptick was driven by an increase in market price that began in late July.
Apart from high fuel costs, expenses on the labor front are also likely to limit bottom-line growth in the third quarter. In fact, labor costs have spiked as the company inked multiple labor deals. Meanwhile, high labor costs have been hurting the company for quite some time and the third quarter is likely to be no different.
Certainly Not a Broker Favorite
Given the challenges faced by the company, it is natural that the stock is not a favorite of brokers right now. The stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised 11.1% downward over the last 30 days.
Furthermore, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions, given the wealth of information at the disposal of brokers. Markedly, the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Additionally, Delta’s Original post
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