Delta Air Lines Inc. (DAL, $23.15) rose 3 percent to $23.15 in Monday’s trading, as the Bloomberg U.S. Airlines Index rose 1.9 percent to the highest level since Aug. 2. Delta shares are being purchased by index funds since its stock was added to the S&P 500 index last week.
Delta’s earnings per share are expected to grow 48% in 2013. Earnings growth will then slow to approximately 6% and 12% in 2014 and ’15. The PE is 8.3, which seems low, but is fair in light of the rapidly slowing earnings growth. The company is focusing on debt reduction; and return of capital via increased dividends and a $500 million share repurchase program.
The share price is up 65% since we told Ransom Notes Radio listeners to buy at $14 earlier this year. The stock broke past short-term resistance at $22 last week, the day after we reiterated our buy recommendation on Delta. Delta Air Lines should appeal to growth, value, and momentum investors. We like both the fundamentals and the chart, and would continue to buy Delta.
