Delta Air Lines Shares Jump on Earnings Beat, But Flags Omicron Risk

Delta Air Lines shares jumped as much as 4.7% on Thursday after the airline company reported better-than-expected earnings and revenue in the fourth quarter but anticipates making a profit this year as travel demand increases.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, reported quarterly adjusted earnings of $0.22 ​​ per share in the holiday quarter, beating the Wall Street consensus estimates of $0.14 per share.

The company said its revenue jumped more than 135% to $9.47 billion from a year ago. That too was above the market expectations of $9.21 billion.

In the first quarter of 2022, the Atlanta-based airline expects revenue to reach 72% to 76% of what it was in 2019. It expects pre-pandemic capacity to be restored to 83% to 85% during this quarter. According to the forecast, the company’s capital expenditures in the quarter will increase by about 69% from the December quarter, according to a Reuters report.

The increasing number of cases of the new Omicron Coronavirus is one of the biggest risks facing the airline industry. After COVID-19 brought the industry to its knees in 2020, American airlines have come a long way. However, the pandemic still lurks in the background.

In a short-staffed industry, a highly contagious virus variant has caused havoc with a new wave of sickness caused by the Omicron Coronavirus. In addition to a spike in daily sick calls, winter storms have also led to massive flight cancellations.

Delta Air Lines shares jumped as much as 4.7% to $42.52 on Thursday. The stock gained over 7% so far this year after falling nearly 3% in 2021.

Executive Comments

“The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President’s Day weekend forward. Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter,” said Glen Hauenstein, Delta’s president.

Analyst Comments

Delta reported 4Q21 revenue of $9.47 billion, above the $9.2 billion consensus but below our estimate of $9.6 billion. Adjusted pretax income of $170 MM was also lower than our $202 MM estimate and below investor day guidance. Delta was on track for a better quarter, but flight cancellations hurt results at the end of the month,” noted Helane Becker, equity analyst at Cowen.

“We believe March will “make” the current quarter as January is likely to be a difficult month given the continued impact of winter weather and the omicron variant. Delta noted they are starting to see fewer sick calls this week among its personnel, so perhaps we are past the peak of employee illnesses. Revenue in the March quarter is forecast to be 72% to 76% of 2019 levels, which is about in line with the 74% recovery in the December quarter. Management is forecasting capacity will be 83% – 85% of 2019 levels; fuel price / gallon of $2.35 to $2.50 and CASM, ex up~15% compared to March 2019. Adjusted net debt is forecast to be ~$22 billion.”

Delta Air Lines Stock Price Forecast

Fifteen analysts who offered stock ratings for Delta Air Lines in the last three months forecast the average price in 12 months of $53.07 with a high forecast of $67.00 and a low forecast of $42.00.

The average price target represents a 26.09% change from the last price of $42.09. From those 15 analysts, 12 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $60 with a high of $96 under a bull scenario and $33 under the worst-case scenario. The firm gave an “Overweight” rating on the airlines’ stock.

“Why Overweight? Delta Air Lines (DAL) has some of the strongest customer satisfaction numbers among the other Legacy peers, while also commanding a higher PRASM, making it our preferred Legacy carrier. While DAL cannot escape Legacy overhangs (delayed International/corporate recovery, strained balance sheet), it should rise with the industry tide. The risk-reward looks attractive,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. BofA Global Research raised the price objective to $48 from $46. Bernstein lifted the target price to $67 from $61. Jefferies upped the target price to $50 from $45. Citigroup cut the price target to $56 from $58.

Technical analysis also suggests it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator giving mixed signals.

Check out FX Empire’s earnings calendar

Why Delta Air Lines Stock Is Up By 3% Today

Delta Air Lines Stock Moves Higher After Strong Earnings Report

Shares of Delta Air Lines gained upside momentum after the company released its quarterly results.

Delta Air Lines reported adjusted operating revenue of $8.4 billion and adjusted earnings of $0.22 per share, beating analyst estimates on both earnings and revenue.

The company’s CEO Ed Bastian revealed Delta Air Lines’ view on the impact of the new wave of coronavirus: “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel”.

Delta Air Lines expects that its Q1 2022 total revenue would be 72% – 76% of its Q1 2019 revenue due to the negative impact of Omicron. However, it looks that traders are ready to bet that Omicron is a temporary problem and that pent-up demand will lead to a very strong second half of 2022.

What’s Next For Delta Air Lines Stock?

Delta Air Lines stock managed to gain ground at the start of this year despite worries over the spread of Omicron. The market believes that the new variant of coronavirus will not deal significant damage to the economy, so traders are mostly focused on Fed policy.

However, it should be noted that analyst estimates for Delta Air Lines’ 2022 earnings have been trending lower in recent weeks. Currently, the company is expected to report a profit of $2.9 per share in 2022, so the stock is trading at less than 15 forward P/E. Such valuation levels do not look too expensive as Delta Air Lines will likely have a great opportunity to improve its financial performance in 2023.

Most likely, the near-term direction of the stock will depend on market’s view on Omicron. In case the market remains confident that Omicron is not a big problem despite the significant number of new cases, Delta Air Lines stock will have a good chance to develop additional upside momentum.

For a look at all of today’s economic events, check out our economic calendar.

Stock Bulls Remain on Unstable Footing. Here Is Why

The US Consumer Price Inflation Index (CPI) rose 7% over the past year before seasonal adjustments, the steepest climb in prices since June 1982. Stripping out food and energy costs, which tend to be more volatile even in non-pandemic times, inflation rose to 5.5% between December 2020 and December 2021 — the biggest annual jump since February 1991.

Inflation issue

Interestingly, excluding gas and used cars, December inflation was 3.7%. The prices of cars and trucks surged +37% in December, furniture prices hiked +17%, and 49% of small businesses surveyed in December said they will increase the prices of goods and or services sold in 2022.

One thing that is worrisome is the fact protein prices (meat, poultry, fish, and egg prices) have surged +18% since December 2019. Food inflation along with fuel inflation could cause the US consumer to pull back so we need to be paying close attention. But even though prices went through the roof last year, they are still nowhere near the historic highs from the 1980s. Inflation peaked in the spring of 1980 at +14.8%.

Remember, however, then-Fed Chair in the early 80s, Paul Volcker, made it his mission to squash inflation. Volcker raised interest rates to +19% in 1981, prompting a recession, however, in 1982. I’m not looking for any type of crazy rates like back in the early-80’s but if the Fed has to raise rates fast and far enough to stop inflation the economy could certainly feel some negative ripple effects.

Covid influence

I know the second major Covid variant Delta extended the inflationary shock waves and this recent resurgence from Omicron is causing even more supply-side complications. I know many bulls are saying that we are again at peak inflation and we will soon start to ease back but who would have ever thought we would be two years in and still peaking with new daily reported Covid cases at over +1.5 million. If new variants of Covid continue to come in waves who know when inflation peaks…

The government injecting billions of dollars into the economy and paying Americans to stay home via stimulus checks when Covid case numbers started to push past 10,000 daily, and now that we are exceeding one million new cases per day all the talk is about the Fed removing stimulus and the need for Americans to get back to some type of normalcy. Now here we are full-circle… In the famous words of the Grateful Dead, “What a long strange trip it’s been.”

The December Producers Price Index is out today and expected to show an annual inflation rate of +9.8% after hitting +9.6% in November, the fastest pace on record. Higher prices for energy, wholesale food, and transportation and warehousing have been the biggest contributors to the pickup in producer inflation.

Bulls believe that once the current Covid wave subsides, consumers will once again dedicate a higher percentage of their spending to services. That will in turn alleviate the crushing demand being placed on manufacturers and the transportation sector, ultimately helping to bring down prices for both raw materials and labor.

That’s the theory at least. It’s worth noting that that exact pattern was starting to develop late last year as the Delta-driven wave was subsiding and consumers were starting to feel more comfortable doing things like go to restaurants, travel, and visit the gym. As we know, that was totally derailed by the rise of the Omicron variant that is currently roiling nearly every aspect of the global supply chain.

Bulls are cautiously optimistic that the Omicron wave will be short-lived with most experts predicting it will peak by the end of January. The big question is what kind of damage will it do to already overly stressed supply chains in the interim? Inflation trends may also depend on how things shake out in the labor market. If workers remain in short supply and wages continue moving higher, it will likely limit how much inflation eases.

Today, investors will be listening closely to several Federal Reserve members that are scheduled to deliver comments, including Fed Governor Lael Brainard who will testify before the Senate Banking Committee as part of her nomination for Fed Vice Chair.

On the earnings front, the key highlights will be Delta Air Lines and Sanderson Farms.

Delta Air Lines at Cusp of Major Upside

Delta Air Lines Inc. (DAL) kicks off first quarter earnings season in Thursday’s pre-market, with analysts looking for a Q4 2021 profit of $0.14 per-share on $9.29 billion in revenue. If met, that small sum will mark a major turnaround, compared to the $2.53 loss posted in the same quarter last year. The stock sold off nearly 6% in October, despite beating Q3 top and bottom line estimates, after the company warned that rising fuel prices would impact Q4 profitability.

The Future Looks Bright

Major airline carriers are suffering through Omicron-induced disruptions, with sick employees forcing the cancellation of thousands of flights. However, passenger counts have declined for the same reason, making it easier and more profitable for airlines to combine scheduled reservations. In addition, pandemic disruptions should ease as quickly as they appeared, with health experts expecting the variant to peak and turn lower in the next few weeks.

BofA Securities upgraded Delta to ‘Buy’ last week while Jefferies analyst Sheila Kahyaoglu raised her target to $50, noting “Following a challenging 2021 and the ongoing spread of Omicron, 2022 sets the stage for another year of recovery w/airline passenger revenues exiting 2021 ~20% off the peak and slated to be ~5% off by the end of 2022. DAL is our top pick given exposure to transatlantic travel (52% of int’l) and SME corporate travel (50% of corporate), along with the cleanest balance sheet of the network carriers.”

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Moderate Buy’ rating based upon 13 ‘Buy’, 2 ‘Outperform’, 7 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets current range from a low of $42 to a Street-high $67 while the stock is set to open Tuesday’s session about $1 below the low target. This dismal placement highlights investor caution after multiple variants but could mark a buying opportunity as infection-induced immunity stretches across the planet and new drugs lower COVID’s lethality.

Delta Air Lines recovered about two-thirds of the 70% decline posted in the first quarter of 2020, topping out just above 50 in March 2021. A shallow decline since that time hit a 52-week low in early December, ahead of a bounce that now testing 200-day moving average resistance. Accumulation has barely budged in the last six weeks but that could change if Thursday’s release includes an upbeat assessment of travel demand after Omicron.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

 

Best Stocks, Crypto, and ETFs to Watch – Coca-Cola, Microsoft, Shiba Inu in Focus

First quarter earnings season starts this week, with Delta Air Lines Inc. (DAL) reporting in Thursday’s pre-market session. The stock closed at a two-month high on Friday, despite well-publicized Omicron-induced travel disruptions. Traders and investors are looking beyond the next month of soaring infections and into the summer travel season, in which massive herd immunity could finally put the COVID pandemic in the rear view mirror.

Dow component Coca-Cola Co. (KO) and other dividend payers have roared out of the gates in 2022, marking a widespread rotation into equities that can withstand high inflation. Barron’s magazine noted this trend over the weekend, highlighting Coke’s bullish outlook after sub-par 2020 and 2021 stock performance. Of course, these sleepy plays aren’t for everyone but a little exposure in a long-term portfolio goes a long way toward getting a good’s night sleep during market downdrafts.

2021’s top-performing tech stocks have been sold aggressively so far this year, highlighting a market tendency for one year’s big winners to become the next year’s big laggards. Dow component Microsoft Corp. (MSFT) could defy this trend, with strong cloud division growth expected to continue into 2023. Buying signals haven’t gone off yet for Mr. Softee but the pullback is slowly approaching support near 300 that could offer a low risk buying opportunity.

Shiba Inu (SHIB) has had a tough time since an oversold bounce ended at 0.00004000 on Christmas Eve, shedding more than 30% while breaking short-term support at 0.00002820. Bears could retain control for the next few weeks but there is a potential light at the end of the tunnel because the decline is approaching strong support at the 200-day moving average at 0.00002400, which has narrowly aligned with the .786 Fibonacci retracement of the September into October rally wave.

SPDR Select Sector Utilities ETF (XLU) posted the third highest ETF volume on Friday, bouncing at 69 after a 5-day pullback. The fund has spent the last month testing resistance at the February 2020 high at 71.10, with a breakout setting the stage for the strongest gains since 2019. Natural gas prices haven’t risen at the same rate as other fossil fuels and many of these companies generate power through water, nuclear, and other cheap energies, making them less vulnerable to rising commodity prices.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held Coca-Cola in a family account at the time of publication. 

Earnings Week Ahead: Q4 Season Kicks Off With Delta Air Lines and Big Banks Like BlackRock, Citigroup, Wells Fargo and JPMorgan

This week will also bring us an inflation report, US-Russia talks, and a lot of Fed talks. The following is a list of earnings slated for release January 10-14, along with a few previews. Investors will carefully monitor the latest news on the rapidly spreading Omicron coronavirus variant to see how it affects earnings in 2022.

Earnings Calendar For The Week Of January 10

Monday (January 10)

TICKER COMPANY EPS FORECAST
AZZ AZZ $0.82
CMC Commercial Metals $1.29
TLRY Tilray $-0.09

 

Tuesday (January 11)

TICKER COMPANY EPS FORECAST
SNX TD Synnex Corp $2.6
ACI Albertsons $0.55

 

Wednesday (January 12)

TICKER COMPANY EPS FORECAST
INFY Infosys $0.17
JEF Jefferies Financial Group $1.4
KBH KB Home $1.77
SJR Shaw Communications $0.3
VOLT Volt Information Sciences $0.07

 

Thursday (January 13)

IN THE SPOTLIGHT: DELTA AIR LINES

Delta Air Lines, one of the major players in the United States aviation industry, is expected to report earnings per share (EPS) of $0.11 in the fourth quarter, more than doubling compared to a huge loss of $-2.53 per share seen in the same period a year ago.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, is forecast to report revenue growth of over 130% to around $9.2 billion. It is worth noting that in the last two years, the airline has beaten consensus earnings estimates just four times.

According to ZACKS Research, based on strong passenger demand during the holidays, Delta Air Lines raised its guidance for the fourth quarter of 2021. It hopes to achieve “meaningful” profitability in 2022 despite Omicron-induced woes. In the December quarter, the airline expects to make approximately $200 million in adjusted pre-tax profit, according to an SEC filing.

Compared to the same period last year, Delta expects to recover 74% of its adjusted total revenues (excluding third-party refinery sales) in the fourth quarter. In 2022, DAL expects its capacity to reach approximately 90% of its level in 2019. In 2023 and beyond, it expects to achieve pre-pandemic levels of capacity. With adjusted revenues (ex-refinery) exceeding $50 billion in 2024, the company expects earnings per share to surpass $7, ZACKS analysts noted.

“Mgmt. laid out a plan to meet and exceed pre-pandemic financial benchmarks by 2024 by building a best-in-class premium airline. The plan is sound and targets appear conservative though the near-term trajectory remains outside of mgmt.’s control. We see line of sight to the stock doubling from here,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“Why Overweight? Delta Air Lines (DAL) has some of the strongest customer satisfaction numbers among the other Legacy peers, while also commanding a higher PRASM, making it our preferred Legacy carrier. While DAL cannot escape Legacy overhangs (delayed International/corporate recovery, strained balance sheet), it should rise with the industry tide. The risk-reward looks attractive.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 13

TICKER COMPANY EPS FORECAST
TSM Taiwan Semiconductor Manufacturing $1.14

 

Friday (January 14)

IN THE SPOTLIGHT: BLACKROCK, CITIGROUP, JPMORGAN, WELLS FARGO

BLACKROCK: The world’s largest asset manager is expected to report its fourth-quarter earnings of $10.14 per share, which represents a year-on-year decline of about 0.4% from $10.18 per share seen in the same period a year ago.

The New York-based multinational investment management corporation would post revenue growth of nearly 15% to around $5.15 billion. The company has been able to beat earnings per share (EPS) estimates most of the time in the last two years.

“We believe BlackRock (BLK) is best positioned on the asset mgmt barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive ~11% EPS CAGR (2020-23e) via ~6% avg LT organic growth,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US. Recently acquired Aperio also bolsters solutions offering and organic growth. We expect the premium to widen as BLK takes share in evolving industry and executes on improving organic revenue growth trajectory.”

CITIGROUP: The New York City-based investment bank is expected to report its fourth-quarter earnings of $1.87 per share, which represents a year-on-year decline of about 10% from $2.07 per share seen in the same period a year ago. But the U.S. third-largest banking institution would post revenue growth of nearly 4% to $17.06 billion.

“While the stock is cheap at 0.6x NTM BVPS, and new CEO is taking strong, proactive strategic action to boost returns closer to peers, we believe these actions will take time to play out,” noted Betsy Graseck, equity analyst at Morgan Stanley.

Citi is exiting 13 consumer businesses in Asia and EMEA, and focusing on higher growth areas of US consumer, Asia WM, International wholesale and consumer payments. These actions could drive ROE higher than the 9% we are modelling for 2023, but we expect the stock will only start to fully reflect this once revenues begins to accelerate. Citi benefits less than peers from higher rates, and we expect some of our more rate sensitive stocks will outperform as the Fed begins to raise rates next year.”

JPMORGAN: The leading global financial services firm with assets over $2 trillion is expected to report its fourth-quarter earnings of $2.94 per share, which represents a year-on-year decline of over 20% from $3.79 per share seen in the same period a year ago. But one of the world’s oldest, largest, and best-known financial institutions would post revenue growth of just over 2% to $29.9 billion.

WELLS FARGO: The fourth-largest U.S. lender is expected to report its fourth-quarter earnings of $1.11 per share, which represents a year-on-year growth of over 70% from $0.64 per share seen in the same period a year ago. The San Francisco, California-based multinational financial services company would post revenue growth of more than 4% to $18.8 billion.

Wells Fargo (WFC) benefit to EPS from rising rates is the highest in the group, with each ~50bps increase in FF driving ~15% increase in EPS; 50bps in long-end rates drives ~7% to EPS WFC is in a strong position to monetize higher rates, as cash stands at 15% of earning assets, 7% points above pre-pandemic levels,” noted Betsy Graseck, equity analyst at Morgan Stanley.

WFC is taking action to restructure its business mix as it works to exit the Fed consent order/asset cap and reduce its expense base. Excess capital at Wells stands at 10% of market cap vs. 5% for median Large Cap Bank, enabling a net buyback yield of 10% in 2022 and a total cash return of 12%. Risks around the timing of asset cap removal and further regulatory action remain.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 14

TICKER COMPANY EPS FORECAST
C Citigroup $1.87
JPM JPMorgan Chase $2.94
BLK BlackRock $10.15
WFC Wells Fargo $1.11

 

Sector Themes In Play In The Markets For 2022

Years like 2021 saw a solid broad-based performance in many stock market sectors. Relatively simple approaches such as Indexing and Sector Rotation did well. But with macro changes in play and many uncertainties for 2022, we may very well see broad indexes underperforming while individual sectors dominated by a few stocks really shine.

Dips will continue to be bought unless something significant changes. But let’s not forget that we’re long overdue for a substantial correction. Significant risk catalysts are:

  • Fed actions.
  • International conflicts (i.e., Russia and China).
  • Pandemic developments that are not currently known.

There’s always the risk of the unknown – the literal definition of a “Black Swan” event. We shouldn’t get too complacent, knowing that we may need to get defensive to protect capital suddenly. When it’s time to be defensive, let’s not forget that CASH IS A POSITION!

Sector theme DRIVERS FOR 2022

Many uncertainties about Covid and the lingering effects on the economy remain. Inflation has roared back to 30-year highs. Strong employment numbers and consumer spending are fueling significant growth in corporate earnings. We also have a shift in bias at the Fed on interest rates and quantitative easing. These are the “knowns” and are theoretically priced in.

For these reasons and more, we should expect more of a “Stockpicker’s Market” in 2022. Certain sectors will do well and weather corrections better than the broader markets.

Even short-term traders can gain an edge by paying attention to what sectors are strongest. Traders tend to benefit most from playing the strongest stocks in the strongest sectors for bullish trades and choosing the weakest stocks in weaker sectors for bearish trades. That “tailwind” can make a significant difference in results.

Let’s look at some sector themes and individual names to keep an eye on in 2022.

ECONOMIC NORMALIZATION

A long-anticipated return to a “normal” economy will continue to be a theme — we just don’t know if that will be Post-Covid or Co-Covid. Or when. Air travel, theme parks, hotels, cruise lines, etc., have all suffered in the persistent Pandemic. What does seem to be changing is the idea of a “new normal” where virus variants may be with us for years to come. We will adjust socially and economically to that for the foreseeable future. DAL, UAL, LUV, AAL are airlines to watch, and the JETS ETF may be a good way to play a general recovery in this sector.

5G INTERNET

The much-hyped rollout of 5G network technology had its share of setbacks and technology disappointments. But 2022 should see the 5G deployment start to take off as technical issues are worked out, and the promise of widespread coverage with transformational performance becomes real. In the background supplying the 5G infrastructure are AMD, QCOM, ADI, MRVL, AMT, XLNX, and KEYS. Along with infrastructure and testing companies, shares of major carriers T, TMUS, and VZ languished for much of the second half of 2021 and looked poised for recovery in the coming year.

ARTIFICIAL INTELLIGENCE

In all its various forms (including autonomous vehicles), AI will remain a developing trend. Big players in the space to watch include MSFT, AMAT, GOOGL, NVDA, AAPL, and QCOM.

EVs and AUTONOMOUS VEHICLES

Electric Vehicles (EVs) are nearing an inflection point where widespread adoption is poised to take off. Technology and cost competitiveness has improved where some EVs will reach price parity with their traditional internal combustion counterparts.

While there are many smaller players in the EV space, automotive stalwarts F, GM, and TM are investing very heavily. TSLA has been grabbing the headlines, but many others want to stake out their territory in the space, including whole tiers of manufacturers and infrastructure enablers like WKHS, XPEV, NKLA, and CHPT.

MATERIALS and MINING

Gold, silver, and related miners underperformed for much of 2021 and now look poised for a recovery year as inflation, and monetary concerns grow. GLD, SLV, GDX, GDXJ, SIL, SILJ look good as both longer and mid-term plays. Metals and miners may get hit initially with a significant downturn in stocks but could ultimately demonstrate their safe-haven potential.

Specific to the growth in EVs, battery technology, etc., copper, lithium, and related basic materials should see stronger demand ahead. FCX looks particularly interesting as a dual play on gold and copper. LIT may be a good ETF play on lithium battery technology.

SEMICONDUCTORS

The market for chips is primed for exponential growth. EV’s have about ten times the number of specialty semiconductors as conventional vehicles. AI, crypto, 5G, mobile devices, and ubiquitous computing should drive growth in the semiconductor sector for some time to come.

REAL ESTATE

Real Estate and Homebuilders should continue to do well while employment numbers remain strong and if interest rates don’t rise too quickly. The inventory shortage in most real estate markets will likely persist well into the new year.

Storage REITs like PSA, LSI, and CUBE have been big winners in the Covid economy and still have room to run.

SUMMARY

Many sectors still look bullish after gains in 2021. But there are “storm clouds” on the horizon, and we must not take future performance for granted.

Lastly, one of the simplest ways to assess how sectors are measuring up is to watch the charts for the S&P SPDR series sector ETFs and a few others. Here are some notable ones to watch:

https://www.thetechnicaltraders.com/wp-content/uploads/2021/12/Dec-31-article.png

These can give us a good starting place to look for leading stocks in winning sectors as the year unfolds.

Let’s remain vigilant for possible market corrections and may the wind be at our backs!

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TheTechnicalTraders.com

 

Airline, Cruise Stocks Suffer as Omicron Spike Chokes Holiday Travel

Airline and cruise stocks tumbled on Wednesday after continued flight cancellations and sailing halts due to adverse weather conditions and the ongoing COVID-19 crisis caused by the spread of the Omicron variant.

According to Reuters, flight-tracking website FlightAware.com reported that nearly 800 U.S. airlines cancelled flights Wednesday morning, and 1,120 flights were delayed. On Tuesday, Delta Air Lines and Alaska Air Group cancelled hundreds of flights, while Southwest Airlines cancelled only a few flights. This was caused by adverse weather conditions and an increase in Omicron cases.

“As European nations mull tighter restrictions to contain the spread of the Omicron variant, experts anticipate a similar trend in the U.S. and across the world in the coming months. As investors speculate a slower recovery timeline for the travel industry, the shares of Southwest Airlines have lost a quarter of their value since November,” noted analysts at TREFIS.

“However, the passenger numbers at TSA checkpoints are just 15% below pre-pandemic levels – indicating strong air travel demand despite heightened fears and tougher Covid norms. Notably, Southwest Airlines stock has lost $11 billion in market capitalization since February 2020 despite burning just $1.1 billion of operating cash over the period. Also, the domestic business contributes almost 97% of Southwest’s revenues and is likely to support earnings amid international travel blockades. Considering the negative impact of the Omicron variant for a quarter, Trefis believes that there is a sizable upside in Southwest Airlines stock.”

On Wednesday, Delta Air Lines stock closed 1.21% lower at $39.15, Alaska Air Group ended 1.46% down at $52.13 and Southwest Airlines finished 0.31% lower at $42.16.

In addition to cancelling 170 flights, Alaska Airlines has warned of more cancellations and delays throughout the week, while Delta plans to cancel 250 of 4,133 flights on Tuesday.

Moreover, Cunard, a cruise company owned by Carnival Corp., announced that the Queen Mary 2 would skip a scheduled stop in New York and instead remain in Barbados until Jan. 2. On Wednesday, Carnival Corp closed 0.48% lower at $20.80, Norwegian Cruise Line ended 1.53% down at $21.57 and Royal Caribbean down 0.04% at $78.22.

According to the US Centres for Disease Control and Prevention (CDC) as of Tuesday, 86 ships had been investigated, and three more were being monitored for cases of COVID-19. As a precautionary measure, the company added more crew members but did not elaborate on why more workers were needed.

A temporary ban on cruising may be reintroduced by U.S. health authorities as a result of the spread of the Omicron variant, just months after cruise companies resumed operations.

Check out FX Empire’s earnings calendar

Why Delta Air Lines Stock Is Under Pressure Today

Delta Air Lines Stock Is Losing Ground After Turbulent Weekend For Airlines

Shares of Delta Air Lines found themselves under pressure after flight cancellations during the Christmas weekend highlighted the risks posed by the spread of Omicron.

Most airlines blamed staffing shortages due to coronavirus for their problems. Not surprisingly, the whole sector is under pressure today, and other stocks like United Airlines, Southwest Airlines and JetBlue are also losing ground in today’s trading session.

It remains to be seen whether this problem will be a long-term one as Christmas weekend is one of the busiest periods for the airline industry, and the situation will likely normalize in the upcoming weeks. However, the disruptions highlighted risks posed by Omicron, and investors may remain worried about similar incidents in the future.

What’s Next For Delta Air Lines Stock?

Analysts expect that Delta Air Lines will report a loss of $4.28 per share in 2021 and a profit of $2.91 per share in 2022, so the stock is trading at roughly 13 forward P/E.

However, it should be noted that earnings estimates for 2022 have been steadily declining in recent months. The reason for this decline is simple – the situation with coronavirus is not improving, while the wave of Omicron boosted risks of additional restrictions, especially for the lucrative international travel segment.

It remains to be seen whether traders will rush to buy shares of Delta Air Lines and other airline stocks after the recent pullback. While airlines should quickly adapt to new challenges as they have a significant experience of dealing with various crises, falling earnings estimates may continue to put pressure on their stocks. The good news for investors is that there is no evidence of big problems on the demand side as pent-up demand for travelling stays strong despite risks posed by the spread of Omicron.

For a look at all of today’s economic events, check out our economic calendar.

Delta Airlines Expects Profits Next Year, Predicts Limited Omicron Impact

The Coronavirus vaccine seemed to have eased affairs, and many industries are starting to reopen. However, the emergence of the Omicron variant poses a threat to normalcy, and some companies could feel its impact.

Delta Airlines Expects to Generate Profits in 2022

Delta Airlines Inc. announced earlier today that it expects to generate profits next year despite the Covid variant affecting activities. The company said it is recording strong domestic flight bookings in the current quarter.

According to Delta Airlines, the Omicron Variant has slowed international bookings at the moment as some countries have imposed new travel restrictions. However, the company expects a limited hit from Omicron in the coming year.

Chief executive officer Ed Bastian told CNBC that “Omicron [is] not going to impact our holiday bookings.” Delta Airlines expects to generate $200 million as pretax profits in the fourth quarter of 2021.

The company told the United States SEC in a recent filing that its executives will outline its plan to boost profits next year and surpass pre-pandemic levels by 2024.

Business Travel is Resuming

Bastian told CNBC that business traveling volume is currently about 60% of 2019 levels, and he expects it to stay around that range over the next few months. Meanwhile, small business travel is about 75% of 2019 levels as the demand is higher compared to the larger companies.

DAL’s stock chart. Source: FXEMPIRE

Delta Airlines’ stock price has been underperforming over the past few hours despite the CEO’s recent projection. At press time, DAL is trading at $35.83, down by more than 2% over the past 24 hours.

The stock has underperformed since the start of the year, losing more than 10% of its value during that period. The dip is due to the pandemic affecting the travel industry. DAL could suffer further losses in the coming weeks as the Omicron variant is causing concerns amongst businesses around the world.

Why Delta Air Lines Stock Keeps Moving Higher

Delta Air Lines Stock Rallies As U.S. Opens Up For International Travel

Shares of Delta Air Lines gained strong upside momentum as U.S. lifted pandemic travel restrictions which means that international visitors could visit the country. While U.S. has imposed certain rules, including a vaccination requirement, the move is expected to lead to a significant boost to airlines’ revenue due to pent-up demand.

Recent news from Merck and Pfizer, who presented positive results of their coronavirus treatments, also boosted sentiment in the travel and leisure segment.

It should be noted that while Delta Air Lines stock managed to move from the $40 to the $45 level in several trading sessions, it continues to trade well below yearly highs near the $52 level that were reached back in March.

What’s Next For Delta Air Lines Stock?

Currently, analysts expect that Delta Air Lines will report a loss of $4.57 per share in 2021. The company is expected to return to profitability in 2022 and report earnings of $3.47 per share, so the stock is trading at 13 forward P/E.

It should be noted that earnings estimates have been moving lower in recent weeks as challenges like labor shortage, global supply chain disruptions and high oil prices hurt outlook for airlines’ profitability.

U.S. decision to open the country for international travellers will likely lead to a material increase in demand for Delta Air Lines services. It remains to be seen whether problems like labor shortage will hurt profitability and performance, but it looks that traders are ready to think about longer-term potential and ignore temporary challenges.

S&P 500 is trading at all-time high levels, and traders search for stocks which have not reached sky-high valuation levels and have the opportunity to grow. In this environment, Delta Air Lines stock and other stocks of the segment have a chance to attract more traders’ interest and develop additional upside momentum.

For a look at all of today’s economic events, check out our economic calendar.

American Airlines Cancels More Flights; Total Tops 2,300

Staffing shortages have hit American Airlines, Southwest Airlines Co and Spirit Airlines Inc in particular, as they ramp up flights ahead of the holiday season but face problems finding enough pilots and flight attendants.

“Flight Attendant staffing at American is strained and reflects what is happening across the industry as we continue to deal with pandemic-related issues,” flight attendants’ union APFA said.

American’s pilot union said last month they planned to picket the carrier’s major hubs to protest work schedule, fatigue, and a lack of adequate accommodation this summer.

The cancellations are another setback to the Texas-based company, which is already reeling from rising fuel and labor costs impacting the industry as the U.S. prepares to open borders to fully vaccinated travelers.

“The airline had particular weather issues that then spiraled into rippled cancellations and were compounded by an inability to fill out schedules from their labor reserves,” UBS analyst Myles Walton said.

Severe winds at the Dallas/Fort Worth International Airport reduced American’s arrival capacity by more than half, with the inclement weather also impacting staffing.

The company, however, hoped some of that impact could be mitigated with nearly 1,800 flight attendants returning from leave starting Monday.

“We expect considerable improvement beginning today with some residual impact from the weekend,” company spokeswoman Sarah Jantz said in a statement. American’s shares recovered losses to trade up 1%.

Meanwhile, rival airlines seemed to have fared better.

Delta Air Lines Inc said on Monday it has not experienced any weather-related cancellations so far, while United Airlines said there were no “widespread cancellations”.

(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Arpan Varghese)

Alaska Air Q3 EPS to Turn Positive For First Time in Six Quarters

Alaska Air earnings per share (EPS) is expected to swing back to positive territory for the first time in six quarters on Thursday, more than doubling to $1.09 per share compared to a huge loss of -$3.32 per share seen in the same period a year ago.

The fifth-largest airline in the United States would report revenue growth of over 170% to $1.9 billion. The airline company has beaten earnings three times in the last four quarters. Alaska Air shares surged over 10% so far this year.

On the other hand, while Delta Air Lines reported greater profits and higher revenues for its third quarter last week. However, the airline company warned that higher fuel prices would negatively impact its bottom line in late 2021 despite improving travel demand. The same concern echoes for Alaska Air as well.

Analyst Comments

“Demand for travel from the Pacific Northwest to Hawaii, southern California and Alaska was strong during the quarter. Of course, the governor of Hawaii urged people not to travel to his state, so we don’t expect a big positive surprise,” noted Helane Becker, equity analyst at Cowen.

“Jet fuel prices doubled off the 2020-pandemic lows, and if the world’s economies recover, they are likely going to go higher. Airlines are working to de-carbonize, but that’s years away, and won’t help 2022, or for that matter 2023 or2024 jet fuel costs.”

Alaska Air Stock Price Forecast

Seven analysts who offered stock ratings for Alaska Air in the last three months forecast the average price in 12 months of $82.29 with a high forecast of $97.00 and a low forecast of $73.00.

The average price target represents a 43.14% change from the last price of $57.49. All of those seven analysts rated “Buy”, according to Tipranks.

Morgan Stanley gave the base target price of $82 with a high of $122 under a bull scenario and $41 under the worst-case scenario. The firm gave an “Overweight” rating on the airline’s stock.

“Why Overweight? We launched coverage on Alaska Air (ALK) last fall as EW recognizing it as a high-quality story that can become very attractive over time but also an airline that ranked mid-pack on most metrics/characteristics and had a tendency of falling between the cracks with investors as well. The good news is that the market has now noticed ALK and it has been a strong performer in the rising industry tide. We still see plenty of upsides ahead,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Evercore ISI raised the target price to $80 from $75. JPMorgan lifted the price objective to $97 from $94.

Check out FX Empire’s earnings calendar

SP500 Is On The Edge – What’s Next?

It’s likely that legislation to fund President Biden’s $4 trillion worth of infrastructure and other spending plans will be moving through Congress around the same time. Those bills are expected to include tax increases for businesses and on capital gains. All of that combined could set markets up for a rocky December but for now, investors are turning attention back to economic data and upcoming earnings.

What to watch next week?

Turning to next week, Q3 earnings “unofficially” kick off Wednesday with earnings from big Wall Street banks, including Bank of America, Goldman Sacks, JP Morgan Chase, and Wells Fargo. Other earnings worth noting next week include Fastenal on Tuesday; BlackRock, Delta, and The Progressive Corp. on Wednesday; Alcoa, Citigroup, Dominos Pizza, Morgan Stanley, United Health Group, U.S. Bancorp, and Walgreens on Thursday; and J.B. Hunt, PNC Financial, and Prologis on Friday.

In economic data next week, it’s a packed calendar that will cover all the economic bases from jobs to inflation. Highlights include the Job Openings and Labor Turnover Survey on Tuesday; the Consumer Price Index on Wednesday; the Producer Price Index on Thursday; and Retail Sales, Empire State Manufacturing, Import/Export Prices; Business Inventories, and the preliminary read on October Consumer Sentiment.

Technical analysis

ES ##-## (Daily) 2021_10_10 (6_59_58 PM)

As we expected SP500 bounced back up last week. The market is reaching a critical point – MA50 retest. There is strong accumulation in this market, while the price holds under daily MA50. In these mixed conditions, its better to stay on the sidelines till the market finds a new direction.

If accumulation remains and the price starts building the base above daily MA50, the market will attempt to renew an uptrend. On the other hand, if futures lose accumulation and price gets rejected at MA50, SP500 might continue to drift to the downside. The cycles forecast bottom in October. But we need a price action confirmation.

Earnings Week Ahead: Most Big U.S. Banks, Delta Air Lines, UnitedHealth and Domino’s in Focus

Earnings Calendar For The Week Of October 11

Monday (October 11)

No major earnings are scheduled for release.

Tuesday (October 12)

Ticker Company EPS Forecast
TRYG Tryg KRW1.71
FAST Fastenal $0.42
PNFP Pinnacle Financial Partners $1.55

Wednesday (October 13)

IN THE SPOTLIGHT: BLACKROCK, DELTA AIR LINES

BLACKROCK: The world’s largest asset manager is expected to report its third-quarter earnings of $9.70 per share on Wednesday, which represents year-on-year growth of over 5% from $9.22 per share seen in the same period a year ago.

The New York-based multinational investment management corporation would post revenue growth of over 13% to around $5.0 billion. In the last four consecutive quarters, on average, the investment manager has delivered an earnings surprise of over 9%.

“We believe BlackRock (BLK) is best positioned on the asset mgmt barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive ~13% EPS CAGR (2020-23e) via ~6% avg LT organic growth,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US. Recently acquired Aperio also bolsters solutions offering and organic growth. We expect the premium to widen as BLK takes share in evolving industry and executes on improving organic revenue growth trajectory.”

DELTA AIR LINES: The earnings per share (EPS) is expected to swing back to positive territory for the first time in seven quarters on Wednesday, more than doubling to $0.16 per share compared to a huge loss of -$3.30 per share seen in the same period a year ago.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, is forecast to report revenue growth of over 170% in the third quarter to around $8.4 billion. It is worth noting that in the last two years, the airline has beaten consensus earnings estimates just three times.

“Airlines will report 3Q21 results later this month, beginning Oct 13 with Delta Air Lines’ release. We believe 3Q21 started strong, sagged in the middle and then finished strong as people started planning holiday trips,” noted Helane Becker, equity analyst at Cowen.

“We believe 4Q21 guidance will reflect a strong peak, likely >2019 levels while off-peak is likely to lag 2019 levels. Stocks to own include United Airlines (UAL), Alaska Air Group (ALK), Allegiant Travel (ALGT) & Southwest Airlines (LUV).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 13

Ticker Company EPS Forecast
JPM JPMorgan Chase $3.00
BLK BlackRock $9.60
INFY Infosys $0.17
WIT Wipro $0.07
FRC First Republic Bank $1.84
DAL Delta Air Lines $0.16

Thursday (October 14)

IN THE SPOTLIGHT: UNITEDHEALTH, DOMINO’S PIZZA

UNITEDHEALTH: Minnesota-based health insurer is expected to report its third-quarter earnings of $4.41 per share, which represents year-over-year growth of over 25% from $3.51 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 11%. The largest insurance company by Net Premiums would post revenue growth of about 10% to around $72.0 billion.

UnitedHealth Group is the number one Medicare Advantage player with ~28% market share, the number two Medicare PDP player with ~20% market share, and the number two commercial player with ~15% market share,” noted Ricky Goldwasser, equity analyst at Morgan Stanley.

United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country. With a large lead in the breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”

DOMINO’S: The world’s largest pizza company is expected to report its third-quarter earnings of $3.11 per share, which represents year-over-year growth of about 25% from $2.49 per share seen in the same quarter a year ago.

The company has beaten consensus earnings per share (EPS) estimates only twice in the last four quarters. The largest pizza chain in the world would post revenue growth of about 7% to around $1.03 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 14

Ticker Company EPS Forecast
UNH UnitedHealth $4.41
BAC Bank Of America $0.71
WFC Wells Fargo $1.00
MS Morgan Stanley $1.69
C Citigroup $1.74
USB US Bancorp $1.15
WBA Walgreens Boots Alliance $1.02
AA Alcoa $1.75
DCT DCT Industrial Trust $0.02
TSM Taiwan Semiconductor Mfg $1.04
DPZ Dominos Pizza $3.11
CMC Commercial Metals $1.19

Friday (October 15)

IN THE SPOTLIGHT: GOLDMAN SACHS

The New York-based leading global investment bank is expected to report its third-quarter earnings of $10.11 per share, which represents year-over-year growth of over 4% from $9.68 per share seen in the same quarter a year ago.

It is worth noting that in the last two years, the world’s leading investment manager has surpassed market consensus expectations for profit and revenue most of the time. The world’s leading investment manager would post revenue growth of over 4% to around $11.25 billion.

“Reason to Buy: Organic growth, solid capital position and steady capital deployment activities continue to enhance Goldman’s prospects. Business diversification offers long-term earnings stability,” noted analysts at ZACKS Research.

“Reason to Sell: Geopolitical concerns and volatile client-activity levels may hinder the top-line growth of Goldman. Further, legal hassles and higher dependence on overseas revenues remain other headwinds.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 15

Ticker Company EPS Forecast
GS Goldman Sachs $10.11
PNC PNC $3.38
TFC Truist Financial Corp $1.09
HON Honeywell International $2.01
GE General Electric $0.51
PLD ProLogis $0.47
VFC VF $1.16
JBHT J B Hunt Transport Services $1.79
GNTX Gentex $0.42
MAN ManpowerGroup $1.91
SXT Sensient Technologies $0.80
ABCB Ameris Bancorp $1.17
ACKAY Arcelik ADR $0.68
BMI Badger Meter $0.50

 

Delta Air Lines’ Earnings To Swing to Positive Territory For First Time in Seven Quarters

Delta Air Lines’ earnings per share (EPS) is expected to swing back to positive territory for the first time in seven quarters on Wednesday, more than doubling to $0.16 per share compared to a huge loss of -$3.30 per share seen in the same period a year ago.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, is forecast to report revenue growth of over 170% in the third quarter to around $8.4 billion. It is worth noting that in the last two years, the airline has beaten consensus earnings estimates just three times.

“Notably, all comparisons in percentage are made to third-quarter 2019. For the third quarter of 2021, the carrier expects capacity to decline in the 28-30% band from the number reported in third-quarter 2019. The carrier anticipates total revenues to drop in the 30-35% range from third-quarter 2019 actuals,” noted analysts at ZACKS Research.

“Non-fuel unit costs in third-quarter 2021 are expected to increase in the 11-15% band from the third-quarter 2019 actuals. Fuel price per gallon in the September quarter is projected in the $2.05-$2.15 range. Capital expenditures and adjusted net debt are likely to be around $800 million and $19 billion, respectively, in the September quarter.”

At the time of writing, Delta Air Lines’ was trading 0.98% lower at $43.25 on Friday. However, the stock rose over 7% so far this year.

Delta Air Lines Stock Price Forecast

Eighteen analysts who offered stock ratings for Delta Air Lines in the last three months forecast the average price in 12 months of $55.21 with a high forecast of $67.00 and a low forecast of $45.00.

The average price target represents a 27.39% change from the last price of $43.34. From those 18 analysts, nine rated “Buy”, nine rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $67 with a high of $96 under a bull scenario and $35 under the worst-case scenario. The firm gave an “Overweight” rating on the airline’s stock.

“Why Overweight? Delta Air Lines (DAL) has some of the strongest customer satisfaction numbers among the other Legacy peers, while also commanding a higher PRASM, making it our preferred Legacy carrier. While DAL cannot escape Legacy overhangs (delayed International/corporate recovery, strained balance sheet), it should rise with the industry tide. The risk-reward looks attractive,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. In July, Bernstein raised the target price to $65 from $64. In June, Jefferies lifted the price objective to $60 from $50. In April, Berenberg upped the price target to $48 from $40.

Analyst Comments

“Airlines will report 3Q21 results later this month, beginning Oct 13 with Delta Air Lines’ release. We believe 3Q21 started strong, sagged in the middle and then finished strong as people started planning holiday trips,” noted Helane Becker, equity analyst at Cowen.

“We believe 4Q21 guidance will reflect a strong peak, likely >2019 levels while off-peak is likely to lag 2019 levels. Stocks to own include United Airlines (UAL), Alaska Air Group (ALK), Allegiant Travel (ALGT) & Southwest Airlines (LUV).”

Check out FX Empire’s earnings calendar

Delta Air Lines Fairly Valued Ahead of Earnings

Delta Air Lines Inc. (DAL) reports Q3 2021 earnings next week, with analysts expecting a profit of just $0.16 per-share on $8.41 billion in revenue. If met, earnings-per-share (EPS) will mark a major turnaround from the $3.30 loss posted in the same quarter last year. The stock sold off in July despite beating Q2 estimates and struggled through the summer months due to numerous cancellations as a result of the Delta variant.

Ticket Sales Growing Once Again

Chief Executive Ed Bastian sounded upbeat last weekend, indicating that ticket sales had started to improve, allowing the company to maintain its modest Q3 revenue forecast. He noted that sales “bottomed out in the later part of August and the first part of September” and that “business traffic is growing back in the U.S.” However, the second comment sounds too optimistic, with many corporations announcing delays until at least the start of 2022 as a result of the pandemic.

The Q3 forecast predicts a 30% to 35% drop in adjusted revenue compared to 2019 levels. On the flip side, it’s looking for domestic travel bookings to surpass 2019 levels in 2022, which is unlikely if another variant impacts sentiment. International bookings may be the wild card heading into next year, with Delta increasing overseas flights as a result of President Biden’s decision to allow foreign travelers, starting in November. Those flights accounted for up to 17% of total 2019 revenue for the big three air carriers.

Wall Street and Technical Outlook

Wall Street consensus has deteriorated since the start of 2021 due to pandemic headwinds, yielding an ‘Overweight’ rating based upon 11 ‘Buy’, 2 ‘Overweight’, and 11 ‘Hold’ recommendations. Price targets currently range from a low of $45 to a Street-high $67 while the stock is set to open Thursday’s session on top of the low target.  Risk of further downside after the earnings release looks minor, given this humble positioning and CEO comments.

Delta Air Lines ground sideways in a trading range between the mid-40s and low 60s for more than two years, breaking down during 2020’s pandemic decline and hitting a 7-year low. The subsequent recovery wave ended less than one point below the .786 Fibonacci selloff retracement level in the low 50s in March 20201, giving way to a pullback that found support in the mid-30s during the summer. The stock has now rallied back above the 200-day moving average near 42, with this support level likely to hold through the rest of 2021.

For a look at today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Why Delta Airlines Stock Is Down By 3% Today

Delta Airlines Stock Falls After Analyst Downgrade

Shares of Delta Airlines found themselves under pressure after several analysts cut their ratings on airlines stocks. The common thesis is that the next year will be a “transition year”, so investors should not expect strong performance from airlines.

Currently, analysts expect that Delta Airlines will report a loss of $3.9 per share this year. The company is expected to return to profitability in the next year and report earnings of $4.1 per share, so the stock is trading at less than 11 forward P/E.

It should be noted that earnings estimates for Delta Airlines have been declining in recent weeks, but this did not put any pressure on the stock which managed to gain upside momentum in the second half of September.

What’s Next For Delta Airlines Stock?

It is obvious that the recovery of the airline industry depends on the trajectory of the coronavirus pandemic and the related restrictions imposed by governments.

Recent data indicates that the number of new cases in the world is falling, but it remains to be seen whether countries will be ready to fully open up their borders for international travel, which is an important component of airlines’ profits.

As usual, the stock market will try to predict future results instead of looking in the rear view mirror, so Delta Airlines stock will be more sensitive to general market sentiment rather than the company’s near term financial results.

However, it should be noted that 11 forward P/E does not look too expensive in the current market environment, so the stock may get some support from value-oriented investors who believe in the successful recovery of the airline industry and are ready to bet on the pent-up demand for international travel.

For a look at all of today’s economic events, check out our economic calendar.

Why Delta Air Lines Stock Is Under Pressure Today

Delta Air Lines Stock Falls As EU Is Reportedly Ready To Introduce Travel Restrictions On U.S. Travellers

Shares of Delta Air Lines found themselves under pressure after recent reports indicated that EU may reintroduce coronavirus-related travel restrictions on travellers from U.S.

According to the reports, the reason for this decision is the active spread of the Delta variant of coronavirus in the U.S. As a result, the average U.S. infection rate exceeded the average EU infection rate.

The move would be a major blow to hopes for global travel normalization. The spread of the Delta variant has already put some pressure on the industry. Airline stocks have been moving lower since early June, and the new developments may serve as an additional bearish catalyst.

What’s Next For Delta Air Lines Stock?

Earnings estimates for Delta Air Lines have moved a bit lower in recent weeks but remained close to levels seen at the beginning of August. Analysts expect that the company will report a loss of $3.48 per share this year and a profit of $4.32 per share in the next year, so the stock is trading at less than 10 forward P/E which is certainly cheap in the current market environment.

However, traders will likely focus on the spread of the Delta variant in the upcoming weeks. It is already clear that the the surge of the Delta variant may have an impact on demand and other countries’ travel-related decisions.

In this light, it remains to be seen whether Delta Air Lines stock will be able to gain upside momentum in the near term. The company’s valuation remains attractive, but coronavirus-related worries may put more pressure on the stock. The recovery of business travel and international travel is likely postponed due to the surge of the Delta variant, and the stock needs stabilization on the virus front for sustainable upside.

For a look at all of today’s economic events, check out our economic calendar.

Today’s Market Wrap Up and a Glimpse Into Thursday

Stocks continued their ascent on Wednesday, with all three of the major indices closing in the green. It was a big day for the S&P 500, which saw the 4,500 level for the first time, even if it closed slightly below that milestone while still in record territory. The Dow Jones Industrial Average closed up nearly 40 points while the Nasdaq set its second all-time high in as many days.

The gains were fueled by optimism that the economic recovery is on track with the tailwind of Pfizer’s FDA-approved COVID-19 vaccine.

Stock index futures held their own on Wednesday evening, suggesting that the good times could continue to roll on Thursday.

Stocks to Watch

  • Salesforce shares are up nearly 2% in extended-hours trading on the heels of the company’s quarterly results, which included growing revenues and robust margins. Salesforce also completed its acquisition of messaging platform Slack. The company also raised its earnings and revenue outlook for fiscal year 2022.
  • Shares of sporting goods retailer Dick’s Sporting Goods rallied 13% thanks to record quarterly results. Dick’s also announced a special dividend on top of a higher regular distribution and bolstered its share repurchase program.
  • DraftKings was up more than 6% on the day. The sports-betting platform got a boost after Cathie Wood of ARK Invest became increasingly bullish on the stock. As sports betting becomes legal in more states, DraftKings could be poised to benefit for the long term. ARK’s Wood scooped up more than USD 60 million of DKNG shares. She is also bullish on Tesla, Roku, and cryptocurrency exchange Coinbase, among other stocks.
  • Williams-Sonoma shares are climbing 12% higher in after-hours trading. The retailer’s Q2 earnings surpassed Wall Street estimates and provided an upbeat revenue forecast. Williams-Sonoma also lifted its quarterly dividend by 20% to USD 0.71 per share. The company is facing some supply chain issues but it did not get in the way of the stock’s rally.
  • Delta Air Lines is requiring its employees to be vaccinated or they will face a USD 200 monthly payment for health benefits.

Look Ahead

The Fed’s Jackson Hole meeting will get underway on Friday. Investors are anxiously awaiting a glimpse into Chairman Jerome Powell’s thinking on asset purchases and consumer prices.