Why Delta Air Lines Is A Stock Picker’s Delight?

Delta Air Lines (NYSE:DAL) reported encouraging earnings results, highlighted by an earnings per share and revenue beat, coupled with optimistic guidance for the second half of 2024. The airline reported earnings of 45 cents per share on revenue of $13.75 billion, both figures representing year-over-year gains. 

The company attributed its successful quarter to significant growth in international travel and a return to normalcy in business travel, fueling its positive outlook for the upcoming months. Unlike its competitors, Delta highlighted strong performance from its premium customers, who are willing to pay extra for premium seats. This demographic has notably boosted in-flight sales, which notably benefits the bottom line. 

This strategic focus on premium customers possibly sets Delta apart from other airlines. It suggests that traders might be underestimating DAL stock, potentially overlooking the profitability and competitive edge that Delta’s emphasis on high-value customers brings to its financial results. 

The Best Stock In A Sketchy Neighborhood 

The concept of a “stock picker’s market” is quite relevant to today’s markets. For those new to investing, this can be understood through the common saying: “a rising tide lifts all boats.” This was exemplified last year in the bull market for artificial intelligence (AI) stocks, where virtually any stock associated with AI benefited from the broader market sentiment. Companies even went out of their way to highlight AI in their earnings reports to capitalize on this trend. 

However, this year marks a shift in investor sentiment; there is a more discerning approach to AI stocks, similar to what is being seen in the airline industry. This brings us to Delta Air Lines. The airline sector faces several challenges, including structural issues with Boeing (NYSE:BA) jets and concerns about the rising costs of jet fuel and the extent to which these costs can and will be passed on to consumers in the form of higher ticket prices. 

Despite these challenges, Delta is optimistic, projecting strong demand to continue through the year. This is especially the case in the second half of 2024, coincidentally after the Federal Reserve is expected to cut interest rates. This optimism raises a critical question for investors: Is Delta being overly optimistic, or are other airlines overly cautious? The answer to this could determine the strategic decisions for investors looking at Delta and its competitors in the current market environment. 

Will The Third Time Be The Charm? 

Take a look at this five-year chart for DAL stock. You’ll notice that on two separate occasions in the last two years, the stock has risen to a level right around $52 but failed to move higher. In technical analysis terms, this has been a point of resistance.  

If Delta stock comes close to recapturing the pivotal $52 price level, more traders may consider entering into a short position. Notably, there has been a 9.8% increase in short interest over the past month. This interest in shorting the stock may be further fueled by the broader market’s pullback. However, investors should closely monitor this situation, as Delta’s upcoming earnings report could potentially serve as a catalyst for the stock to rise further.  

Regardless of the immediate outcomes from the earnings report, Delta is increasingly being viewed as an attractive value stock. The airline, which suspended its dividend in 2020 due to financial pressures from the pandemic, reinstated it in 2023. With the company now in a healthier financial position after reducing its pandemic-induced debt, the reinstated dividend appears secure and is likely to increase in the forthcoming quarters. This development makes Delta a compelling consideration for value-oriented investors looking for stocks with potential for dividend growth.