Delta Air Lines, Inc. (NYSE:DAL)

More mergers = less competition
less competition = higher fares
higher fares = larger earnings
larger earnings = higher share price

Delta is my favorite US airline to fly. But airline companies have a horrible cost structure, and airline stocks underperform as a result.

Looking at the Balance Sheet on March 18th, 2013, DAL has a negative book value of 2.131 billion, and a current ratio of .62

What looks even worse though, is that of the 44.550 billion of "assets", almost 14.5 billion (32%) of this is Goodwill & Intangibles. DAL appears to be insolvent, yet incredibly the company has reached a 52 week high today of $16.48 This appears to be a perfect example of "market folly": as described by Warren Buffet...(No offence to George Soros...but billionaires make mistakes too...although perhaps he will cash out at a profit before it falls...).

I made the "thumbs down" call on Nov 30, 2011 at $7.58, and am still 99% confident that this will be a very profitable "caps points" call...

Although I am employed in the airline business, which I love and probably will be for life, I know from this experience that aviation isn't exactly the most profitable business out there, if not one of the worst. Very, very competitive market out there with lots of risk and very few certainties.

Still, Delta is one of the top world players and I think they will survive for many decades to come.
But if you look at the rise of this one over the last couple of months, it's time for a step back.

The recent run-up seems unsupported by fundamentals. Oil prices likely can and will go higher. TSA delays and FAA furloughs may reduce traffic. Recent weather problems will hurt traffic. Delta continues trying to expand its already expansive routes, which is usually a recipe for capital loss in this space.

DAL is estimated to show 14% projected earnings growth for 2014 of around $3.00 per share at a forward 2014 PE of 4.6. I think this means the stock has some room to run. I'll project that they will earn $2.80 in 2014 and trade at a P/E of 7 for a target price in the next 18 months of $19.60 or about 40% above current prices.

They are getting there "ship" in order.

Look at the trend upward for Revenue and Earnings.

paying attention

Delta is running a relatively lean business with little union interference. New York is prime territory for growth and current facility expansion there looks good, the "new" gate space at Heathrow could be the crowning touch. Oil continues to be a hurdle but can be managed with active price adjustments and like the oil business, quick to adjust up and reluctant to yield to downward pressure.

Delta suffers from the worst fuel efficiency of any airline. It suffers from lackluster customer confidence and has the oldest fleet of any major airline. It is reinvesting too slowly and its corner-cutting will continue to push it further behind competition.

Delta is firing on all cylinders. The employees believe in the company and the CEO, Richard Anderson has vision and a sincere desire to run a world class airline. Look for Delta to continue to gain market share.

Airlines exist to burn investor capital while jumping over each other to drive all their competitors' margins down to zero. Economic weakness and high fuel prices only exacerbate this trend. Delta is no exception.

Go Delta! I don't love this company, but as an Atlantan, I am required to root for them.

I understand this company is an airline.

Unedited excerpt from a CAPSCall article anticipated for publication on 02-MAY-2012:

[A]ssume for a minute that Delta is successful in its quest to operate the refinery efficiently and turn it into its own private supply of cost-effective jet fuel. Think about that from an economics 101 perspective. By servicing its own demand privately with new capacity brought in from the now idle plant, it’d effectively be increasing the supply of jet fuel available on the market from other refineries.

The refinery capacity that’s currently slated for Delta simply becomes available to service the other airlines, whose demand isn’t changing. Or in other words, if this works out for Delta, all the airlines benefit from a tighter crack spread -- but only Delta has to cover the purchase, investment, financing, and operating costs of running a refinery. It seems like the best case for Delta is an even better case for competition like United Continental (NYSE: UAL) that still gets its fuel the old fashioned way.

Where’s the upside?
Whether you look at it from the perspective of the facility itself, the economics of the refining industry, or the market implications if the plan is successful, there doesn’t seem to be a clear win for Delta. Running an airline itself is an incredibly difficult business where small fortunes are often made by starting with large fortunes. An investment like this with no clear path to a sustainable competitive advantage seems like yet another airline attempt to make a small fortune by starting with a large one.

they keep raising prices

Value stock bouncing back, next year should be kind although new legislation proposed may sink into baggage profits

Relative Bounce Likely Complete, Fall to Resume

Delta airlines? Really?
I think my screener is broken.