Delta Air Lines (DAL) is a Zacks Rank #5 (Strong Sell) despite beating the number in the most recent earnings release. The airlines have had a rough couple of years here with the pandemic and tons of rowdy passengers so I don’t want to pile on here.  Instead, let’s look at why this stock is  a Zacks Rank #5 (Strong Sell) and in this Bear of the Day article.

Description

Delta Air Lines is one of the four carriers that controls majority of the US aviation market (the carriers account for more than 60% of the domestic market share). This development followed a spate of mergers in the industry during the early part of this century.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of DAL, I see three straight beats of the  Zacks Consensus Estimate.   This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For DAL I see annual estimates moving lower.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.

The current year 2022 consensus number has dropped from $2.28 to $1.93.

The next year has dropped from $5.79 to $5.67 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Chart

Delta Air Lines, Inc. Price and Consensus

(Click on image to enlarge)

Delta Air Lines, Inc. price-consensus-chart | Delta Air Lines, Inc. Quote