Markets

Here's Why Delta (DAL) Stock Tanks 37.6% in the Past 6 Months

Shares of Delta Air Lines DAL have shed 37.6% of value in the past six months compared with its industry’s 27.6% decline.

Let’s look into the factors responsible for such a dismal price performance of this currently Zacks Rank #4 (Sell) stock.

Akin to its peers American Airlines AAL and United Airlines UAL, Delta is suffering lackluster passenger revenues due to the coronavirus-induced bleak air-travel demand. Evidently, passenger revenues plummeted 60% year over year in first-half 2020.

With the fall in traffic (59%) outpacing the capacity reduction (48%), load factor (percentage of seats filled by passengers) was down to 67% in first-half 2020 from 86% in the first six months of 2019. Passenger revenue per available seat mile (PRASM) too dropped 23% year over year in the first half of 2020 to merely 11.87 cents.

Due to capacity contraction, which was enforced to match the extremely poor demand scenario, cost per available seat miles (CASM) is increasing. Evidently CASM shot up 49% in first-half 2020 to 22 cents. Dwindling demand also forced Delta to suspend flights to 11 U.S. destinations.

Moreover, with the federal assistance under the CARES Act expiring on Sep 30, 2020, Delta intends to furlough 1,941 of its pilots if a suitable cost-cutting agreement is not reached with the concerned labor union in October.

Southbound Estimate Revisions

Thanks to disappearing demand and the economic uncertainty ahead, the Zacks Consensus Estimate for current-quarter bottom line has worsened to a loss of $3.03 from $2.20 loss in the past 60 days. Similarly, the Zacks Consensus Estimate for current-year bottom line has widened to a loss of $9.48 from $7.83 loss in the past 60 days.

Stock to Consider

Investors interested in the Zacks Transportation sector may check out the better-ranked United Parcel Service UPS. The stock carries a Zacks Rank #2 (Buy) at present. You can see the completelist of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of UPS have rallied more than 76% in the past six months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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