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Value Investor
Wealth Building Opportunites for the Active Value Investor

Cabot Undervalued Stocks Advisor Special Bulletin

This stock reported great first-quarter results.

Today’s news: Delta Air Lines (DAL) reports great first-quarter results.

Delta Air Lines (DAL – yield 2.4%) reported first-quarter adjusted earnings per share (EPS) of $0.96 this morning, above all analysts’ estimates. Revenue came in on target at $10.4 billion. The company also guided Wall Street to adjusted second-quarter EPS in a range of $2.05-$2.35. Prior to today’s earnings guidance, the second-quarter consensus EPS estimate was $2.13, within a range of $1.97-$2.29.

The increases in first- and second-quarter actual and projected results should push analysts’ full-year estimates to reflect approximately 19.3% EPS growth vs. the previous consensus estimate that pointed toward 16.8% EPS growth. Any time you see double-digit full-year earnings growth in a large company, especially for two or more years in a row, that’s an achievement worth noting—and you can bet that professional investors are noticing it, too. (Delta grew EPS by 14.6% in 2018.)

Virtually all Wall Street analysts will be writing glowing research updates on DAL in the coming days and raising both their second-quarter and full-year earnings estimates.

FYI – A declaration of Delta’s annual dividend increase usually takes place in late July.

DAL is an undervalued growth & income stock. The stock is up about 1.50 in pre-market trading at 58.5. There’s price resistance at the December high of 60, so here are your two most likely scenarios in the coming days/weeks:
1. The stock rises to 60 this week and gets stuck there for a little while, bouncing around in the upper 50s.
2. The stock quickly climbs past 60 and rises further, maybe to about 65, then pulls back to 60, where it rests for a while before beginning a sustainable run-up.

This is not the time to be selling DAL. If you need to raise portfolio cash, start with stocks that are projected to achieve stagnant or falling EPS in 2019, because the market is not likely to embrace those stocks any time soon. Strong Buy.