Today’s news: Delta Air Lines (DAL) is now Retired from the Growth & Income Portfolio; Alaska Air Group (ALK) joins the Buy Low Opportunities Portfolio as a Strong Buy.
Now that analysts have had a chance to rework their 2020 earnings projections in the wake of Delta Air Lines’ (DAL) second-quarter results, I can see that the numbers haven’t improved. Next year’s EPS is expected to grow just 5.4%.
Delta Air Lines is a wonderful company. If you’re a buy-and-hold investor who hates selling stocks, then keep DAL. But if you prefer to keep your portfolio full of stocks that have good future earnings growth prospects, as I do, then it’s time to sell DAL and move on to a more growth-oriented company. Retired.*
Alaska Air Group, Inc. (ALK – yield 2.2%) is a low-cost passenger airline. Alaska Airlines and its regional partners fly 46 million guests a year to more than 115 destinations with an average of 1,300 daily flights across the United States and to Mexico, Canada and Costa Rica. Air service expanded again this year, including 10 new destinations and routes in the first quarter, and more recently, new service to Palm Springs, CA, and increases in service to Florida and Hawaii. Alaska Air does not operate any Boeing 737 Max jets.
Alaska Air is focused on expanding margins in the coming years, primarily through increasing revenue and lowering operational costs, which are an ongoing result of the December 2016 Virgin America acquisition.
Alaska Air is a well-respected airline. For the 12th year in a row, Alaska Airlines is recognized as the highest ranked airline in customer satisfaction among traditional carriers in the J.D. Power 2019 North America Airline Satisfaction Study. In this year’s study, Alaska received the highest ranking in six out of seven categories among traditional airlines: aircraft; check-in; cost and fees; boarding/deplaning/baggage; flight crew; and reservations.
Alaska Air Group is expected to report second-quarter EPS of $2.12 on the afternoon of July 25, within a range of $1.96-$2.17.
Wall Street analysts expect full-year earnings per share (EPS) of $6.04 and $7.03 in 2019 and 2020, reflecting EPS growth rates of 35.4% and 16.4%, respectively. Alaska Air’s 2019 price/earnings ratio (P/E) is 10.5.
Alaska Air held $1.4 billion of cash and marketable securities as of March 31. The company is committed to returning capital to shareholders via dividend increases – which take place annually near February 1 – and share repurchases, including $13 million of repurchases in the first quarter of 2019.
ALK is a mid-cap stock with a $7.8 billion market capitalization. ALK has upside price resistance at 74, 80 and 95. There’s plenty of room for traders, growth stock investors and growth & income investors to potentially make good profit in both the short term and the long term. Buy ALK now, prior to the July 25 earnings release. Strong Buy.
*As a reminder, “Retired” means I’m removing the stock from the portfolio, but there’s no great harm if you decide to keep the stock and collect the dividend. “Sell” means that I don’t think anybody should own the stock, due to at least one major problem.