Delta: A Technical Take-Off

07/23/2013 7:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Delta Airlines, part of the strong acting airline sector, has broken out from a 10-week flat base and moved to a new all-time high, notes technician Leo Fasciocco of Ticker Tape Digest.

Delta (DAL), based in Atlanta, has annual revenues of $36.8 billion. Its route network gives it a presence in every domestic and international market.

Delta's network is centered around the hub system it operates at airports in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles de Gaulle, Salt Lake City, and Tokyo-Narita.

Each of these hubs includes flights that gather and distribute traffic from markets in the geographic region surrounding the hub, to domestic and international cities and to other hubs.

Technically, the stock put down a well-formed flat base with most of the work done above a rising 50-day moving average line. The momentum indicator is strongly bullish. And the accumulation-distribution line is in a steady uptrend.

Net for the upcoming second quarter should leap 36% to 94 cents a share from 69 cents a year ago. The highest estimate on the Street is at 99 cents a share. The past nine quarters, DAL has tended to surprise on the upside.

Its 12-month performance shows the stock appreciating 80% versus a 24% gain for the stock market. There was strong insider buying in February. The insiders were right on.

The stock traded as high as $21 back in 2007. It fell to around $5 during the bear market. It climbed to $15 in 2010 where it met long-term resistance. However, this year it has pushed resistance and is in a solid uptrend. 

This year, analysts are forecasting a 45% surge in profits to $2.65 a share from $1.83 a year ago. The stock sells with a price-earnings ratio of just seven. That is low, making the stock a very good value play.

Going out to 2014, profits are projected to climb 14% to $3.04 a share from the anticipated $2.65 for this year.

The largest fund holder is 4-star rated American Funds New Perspective Fund with a 2.9% stake. Recently, the largest fund buyer was Fidelity Magellan Fund, which purchased 2.8 million shares.

We rate DAL a good intermediate-term play, (provided earnings remain on course.) We are targeting the stock for a move to $25 after this breakout. A protective stop can be placed near $17.50. One may need to be patient with these shares.

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