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Why Delta’s share price increased after 3Q14 earnings release

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Nov. 20 2020, Updated 4:24 p.m. ET

Share price

Delta’s share price increased after the release of its 3Q14 earnings on October 16, 2014. On October 13, 2014, Delta’s share price reached $30.90—the lowest level since February 2014. This was due the fear of an Ebola outbreak when the first few cases were diagnosed in U.S. Share prices of all top airlines fell sharply.

Delta’s (DAL) share price decreased by 6%—from $32.91 on October 10, 2014, to $30.90 on October 13, 2014. American’s share price fell by 2.5%, United’s by 7.3%, Southwest’s by 5.5%, JetBlue’s by 6.5%, and Alaska’s by 2%.

However, all the companies recovered the very next day as the panic subsided. Delta’s share price increased by ~3% after the third quarter earnings were released.

Valuation

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In spite of the recent increase in share price, Delta’s enterprise value to earnings before interest, tax, depreciation, and amortization (or EV/EBITDA) multiple is 6.57x. This is lower than American’s (AAL) 7.35x and Southwest’s (LUV) 7.63x. United (UAL), Alaska (or ALK), and JetBlue (or JBLU) are lower at 6.54x, 4.66x, and 6.02x, respectively.

Delta is focused on its cost reduction initiatives. It has been very cautious in its capacity expansion plans. Also, significant improvements in leverage resulted in an upgrade to its credit rating. Shareholders will benefit from higher returns in the form of dividend and share repurchase plans.

Most of the Wall Street analysts recommended a buy for the stock with almost a ~20% upside potential from the current market price.

Investors can gain access to the airline industry through exchange-traded funds (or ETFs) like the iShares Transportation Average ETF (or IYT) and the SPDR S&P Transportation ETF (XTN).

To learn more about the airline industry, visit the Market Realist Airlines page.

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