Delta Airlines Finds Unique PR Opportunity Thanks To Conservative Gadfly

Delta (DAL) provides scheduled air transportation for passengers and cargo throughout the United States and across the world. The Company's segments include Airline and Refinery. The Company's route network is centered around a system of hub, international gateway and airports that the Company operates in Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Minneapolis-St. Paul, New York-LaGuardia, New York- John F Kennedy International Airport, Paris-Charles de Gaulle, Salt Lake City, Seattle and Tokyo-Narita. Each of these operations includes flights that gather and distribute traffic from markets in the geographic region surrounding the hub or gateway to domestic and international cities and to other hubs or gateways. The Company's route network includes its international joint ventures, its alliances with other foreign airlines, its membership in SkyTeam and agreements with multiple domestic regional carriers that operate as Delta Connection.

Airlines have been flying high for our models for a while now thanks to low fuel prices, a better economy, added fees for almost every extra perk, and lower competition thanks to consolidation within the industry. We have featured many of them over the past year or so and typically they are BUY or STRONG BUY rated as their profits increase and their empty seats decrease.

However, with those good times, the airlines have suffered through a variety of PR nightmares as employees have shown a remarkable ham-handedness when dealing with paying customers thanks to overbooked flights, overzealous application of rules, and a general lack of customer service niceties. Throwing entire families off of planes, having security drag customers off over-booked flights, and forcing customers to suffer a variety of other indignities can lead to a sea of bad publicity thanks to the ubiquitous smart phones and social media websites.

Delta Airlines had another PR fire storm break out today, but it is--so far--failing to follow the pattern of past incidents. B-list right-wing media starlet Ann Coulter booked--and paid $30 extra for--a coach seat with extra- legroom on the airline. However, when she boarded the plane she was moved from that seat to another one.

Typically, this might be handled with a complaint to management and then a refund or travel voucher. But Coulter took to Twitter to criticize Delta. Then, something surprising occurred. In the ensuing pile-on/dust up, Coulter managed to create a fire storm of sympathy for Delta thanks to her social media tactics and tone.

The right-wing media starlet criticized both Delta employees and passengers in a variety of tweets, claimed it cost her "$10,000" of her time to book the coach-plus seat, and in general threw a tantrum all out-of-proportion to the situation. Delta then hit back, criticizing her for “posting derogatory and slanderous comments and photos in social media."

Coulter has since been subjected to huge amount of ridicule online as onlookers find her tantrum juvenile and her claims of her own worth--$10,00 "hourly rate" to book an airline ticket?-- ridiculous.

So, here we find that in some cases consumers can, in fact, have sympathy for big corporations--even those as oft-despised as the airlines in the age of overbooking and massive fees for everything from checked bags to blankets and pillows.

Of course, our models cannot know of this PR incident, Coulter's tantrum, etc. But they have been high on Delta for quite some time. Below is our latest data for Delta (DAL):

We continue our BUY recommendation on Delta for 2017-07-14. Based on the information we have gathered and our resulting research, we feel that Delta has the probability of outperforming average market performance for the next year. The company exhibits ATTRACTIVE Company Size and Sharpe Ratio.

 

ValuEngine Forecast

 

Target
Price*

Expected
Return

1-Month

55.60 0.85%

3-Month

56.12 1.80%

6-Month

58.15 5.48%

1-Year

60.77 10.23%

2-Year

68.82 24.84%

3-Year

73.88 34.01%

 

Valuation & Rankings

Valuation

17.17% overvalued

Valuation Rank

28

1-M Forecast Return

0.85%

1-M Forecast Return Rank

95

12-M Return

34.53%

Momentum Rank

79

Sharpe Ratio

1.09

Sharpe Ratio Rank

93

5-Y Avg Annual Return

31.82%

5-Y Avg Annual Rtn Rank

95

Volatility

29.32%

Volatility Rank

53

Expected EPS Growth

16.43%

EPS Growth Rank

51

Market Cap (billions)

46.14

Size Rank

98

Trailing P/E Ratio

11.18

Trailing P/E Rank

90

Forward P/E Ratio

9.60

Forward P/E Ratio Rank

86

PEG Ratio

0.68

PEG Ratio Rank

53

Price/Sales

1.17

Price/Sales Rank

65

Market/Book

3.56

Market/Book Rank

36

Beta

1.19

Beta Rank

29

Alpha

0.22

Alpha Rank

82

Disclosure: None.

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Comments

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Barry Hochhauser 6 years ago Member's comment

I figured #Delta's problems would be forgotten once the next PR crisis hit another company. But I've been amazed at how they've suffered from one debacle after another. Their recovery will take longer than I initially thought. $DAL