We are upgrading our recommendation on Delta Air Lines (DAL) to Outperform based on third quarter results, which matched the Zacks Consensus Estimate, and continuous cost reduction initiatives. Despite soaring fuel prices, earnings on a GAAP basis climbed on fare hikes, capacity cuts and unbundled offerings.
Delta continues to make efforts to reduce its operating expenses, including both fuel and non-fuel costs. The company is also progressing well on upgrading seats, replacing older planes in its fleet, installing WiFi and expanding Economy Comfort to other aircrafts.
Additionally, Delta is expanding its footprint in both domestic and international markets, thereby strengthening its competitive position. Furthermore, merger synergies from Northwest Airlines as well as efforts to deleverage its balance sheet make the stock more attractive.
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