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Where Does Delta Air Lines Stand among Its Peers?

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Dec. 7 2018, Updated 9:00 a.m. ET

Trading at a discount

Delta Air Lines (DAL) is the largest airline company in the United States, in terms of market capitalization, at $38.9 billion. The low fuel price environment, efficient cost management, and disciplined capacity enhancement helped Delta grow its profitability in the last few years.

The best ratio for comparing airline stocks (IYT) is the EV-to-EBITDA multiple. Currently, Delta is trading at a discounted valuation multiple compared to its top peers.

At the current market prices, Delta is trading at a discount to its peers. The stock has an EV-to-EBITDA multiple of 5.97x. American Airlines (AAL), Southwest Airlines (LUV), and Spirit Airlines (SAVE) have multiples of 6.41x, 6.82x, and 9.41x, respectively.

Based on analysts’ 12-month EBITDA expectations, Delta is trading at a discount to its competitors except for American Airlines. Delta, American, Southwest, and Spirit’s forward ratios are 5.44x, 5.25x, 6.24x, and 6.12x, respectively.

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Analysts’ ratings

Delta has a consensus “buy” rating from analysts covering the stock. About 95% of the analysts provided a bullish recommendation on the stock. Eight of the 20 analysts had a “strong buy” recommendation, while 11 analysts had a “buy” recommendation. Only one analyst had a “hold” recommendation. Analysts’ target price of $68.89 represents a 21% increase from the current price of $56.94.

Delta stock has received sharp upward EPS estimate revisions in 2018 and 2019. The mean estimate for the 2018 EPS increased to $5.56 from $5.51 on October 10. The 2019 EPS estimate improved to $6.48 from $6.35.

Analysts increased their 12-month target price on Delta stock after the company’s third-quarter results. The current consensus estimate of $68.89 is slightly higher than the target price of $67.87 before the third-quarter earnings report.

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