Strong Airline Earnings Point to Solid Future Returns

The airline industry is back. Earnings season is still unfolding, but the airlines, which looked like they may be facing years of challenge ahead at the start of the pandemic, are already at or near profitability.

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  • Delta Airlines (DAL) has led the way with earnings so far. The company earned $1.02 per share, excluding special items on its earnings. The move comes as domestic travel rebounds to pre-pandemic levels.

    Given that Delta was expected to lose $1.33 per share, the results are nothing short of fantastic. Despite the strong numbers, shares still sold off when the company reported on Wednesday, and shares are still down nearly 25 percent from their peak set in April.

    Overall, shares are up about 44 percent in the past year, and shares have beaten the market at that time, even as the company’s comparable earnings and revenue numbers still look poor from the pandemic.

    Action to take: The company’s strong earnings point to shares moving higher once again, likely moving to a new 52-week high, although that may take months.

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  • The company doesn’t currently pay a dividend, so investors will have to simply ride shares higher for capital gains.

    Shares have been trending down in the past few weeks, so traders may want to wait for that short-term trend to reverse before buying call options to bet on a move higher. The December $50 calls, last going for about $2.10, can likely be bought at a lower price when the trend flips for bigger profits.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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