Delta Airlines reported its quarterly earnings yesterday and came in way under expectations. While the adjusted earnings of $735 million is Delta’s highest profit yet in the pandemic era, it is still more than a quarter million short of the expected earnings of $1.1 billion analysts were expecting.
There are a few reasons Delta fell so short of expectations. Executives admit mistakes were made over the past quarter that led to this disappointing earnings day. Here are a few of the most noteworthy culprits for the poor earnings report:
- Too many flights on the schedule: this led to widespread cancellations as Delta was unable to fill flights. The end result? Dramatic increases in operating costs as employees ended up earning excessive overtime pay. More importantly, a tarnished reputation among customers who dealt with these cancellations.
- Increases in fuel cost: Delta, like all American companies and citizens, is struggling with the rising costs of fuel. Fuel costs for the airline company are up 22% since 2019, causing rapid decay in profitability.
While travelers are back to booking flights as pandemic restrictions and fears start to ease, it appears they aren’t flying with delta at the rate they once were. Delta saw an 18% lower capacity than it did in the same quarter in 2019 when the pandemic had yet to take hold on the world. This, coupled with spikes in employee and fuel costs, has led to another quarter of underperformance.
The news shook the investing world, and the stock price dropped 6% right away. And if you’re currently holding Delta, you may be wondering what your next move should be. Or, perhaps you want to see if now is a good time to buy Delta. Well, keep reading down below as we explain what this news means for investors like you.
We Rate Delta a Sell Right Now – Here’s Why
Here at VectorVest, we’ve conducted a deep analysis of Delta Airlines and rated it a sell beginning June 9, 2022. While our calculations show the stock is currently undervalued by a large margin, the safety, timing, and volatility are poor right now. Delta lacks the ability to resist severe or lengthy price declines – which could make for some stressful holding periods. And, the direction, magnitude, and dynamics of the stock’s price movement tell us it’s in a strong downtrend. This is coupled with a poor relative safety index, which has been computed by analyzing the consistency and predictability of a company’s financial performance.
Delta Airlines has huge upside potential and is currently way undervalued. However, it’s not time to buy. If you’re looking to get into Delta, keep it in your WatchList and wait for the stock price to start climbing. VectorVest will signal when the stock is in an uptrend when its Relative Timing indicator crosses above 1.00 on a 0 to 2.00 scale, currently 0.51. That’s when you’ll know the price is officially in an uptrend and not just a head fake.
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