Option Trade
Delta Air Lines, Inc. (NYSE:DAL) Calls 
Sunday, April 12, 2015

**OPTION TRADE: Buy the DAL Jun 2015 45.000 call (DAL150619C00045000) at or under $2.00. Place a protective stop loss at $0.80, and a pre-determined sell at $3.50.

by Ian Harvey

April 12, 2015

Introduction

Delta Air Lines, Inc. (NYSE: DAL), an airliner company that provides scheduled air transportation for passengers and cargo throughout the United States and internationally, will report its first-quarter numbers before the market opens on April 15. Going into the release, analysts have forecast quarterly earnings of $0.44 per share, up from $0.33 during the same period last year.

Delta had a very bullish run last year but has lost a bit of momentum over the last couple of months – which is beneficial for this option trade as it allows for a lower entry price and more projected profit! However, the lower oil prices have been an asset to Delta and the recent quarter is very likely to produce a strong report.

Delta should head towards $63.29 per share according to 12 analysts in consensus. However, if the road gets shaky, the stock objective may fall short to $50 per share. The higher price estimate target is at $81 according to the analysts.

Technical Details

Delta Air Lines has a 52 week low of $30.12 and a 52 week high of $51.06. The stock’s 50-day moving average is $45.00 and its 200-day moving average is $43.00.

The company has a market cap of $35.20 billion and a P/E ratio of 55.03.

Earnings

Delta Air Lines last posted its quarterly earnings results on Tuesday, January 20th. The company reported $0.78 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.72 by $0.06. The company had revenue of $9.65 billion for the quarter, compared to the consensus estimate of $9.57 billion.

During the same quarter in the prior year, the company posted $0.65 earnings per share. The company’s quarterly revenue was up 6.3% on a year-over-year basis.

Positive Aspects

• Since the same quarter one year prior, DAL’s revenues have slightly increased by 6.3%.

• The steep decline in earnings per share in the most recent quarter in comparison to DAL’s performance from the same quarter a year ago but analysts anticipate this trend to reverse over the coming year. During the past fiscal year, DELTA reported lower earnings of $0.75 versus $12.29 in the prior year. This year, the market expects an improvement in earnings ($4.77 versus $0.75).

• The stock of Delta today, compared to one year ago, is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period.

• Even though the current debt-to-equity ratio is 1.11, it is still below the industry average, suggesting that this level of debt is acceptable within the Airlines industry.

Analysts Opinions

Cowen and Company set a $55.00 price target on Delta Air Lines (NYSE:DAL) in a research report sent to investors last Monday morning. The firm currently has a buy rating on the stock.

Also, TheStreet Ratings team rated DELTA AIR LINES INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:-

"We rate DELTA AIR LINES INC (DAL) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

The company has also been the subject of a number of other research reports:-

• Analysts at Deutsche Bank downgraded shares of Delta Air Lines from a buy rating to a hold rating and lowered their price target for the stock from $60.00 to $50.00 in a research note on Wednesday, April 1st.

• Analysts at Zacks reiterated a hold rating on shares of Delta Air Lines in a research note on Monday, March 30th.

• Analysts at Argus initiated coverage on shares of Delta Air Lines in a research note on Monday, March 30th. They set a buy rating and a $55.00 price target on the stock.

• Finally, analysts at CRT Capital lowered their price target on shares of Delta Air Lines from $63.00 to $59.00 and set a buy rating on the stock in a research note on Wednesday, March 4th.

Three investment analysts have rated the stock with a hold rating, nine have given a buy rating and one has given a strong buy rating to the company’s stock. The company currently has a consensus rating of Buy and a consensus target price of $61.00.

Conclusion

A strong quarterly report is expected from Delta which should be a positive boost for this option trade.

Therefore, based on the facts above the following options trade is recommended…..


**OPTION TRADE: Buy the DAL Jun 2015 45.000 call (DAL150619C00045000) at or under $2.00. Place a protective stop loss at $0.80, and a pre-determined sell at $3.50.



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