Delta Air Lines Inc. (NYSE:DAL), backed by its highest top-line growth in seven years and peer-leading margins, has outperformed the legacy network peers with a year-to-date (YTD) price gain of c. 10.0%. United Continental Holdings, Inc. (UAL) and American Airlines Group Inc. (AAL) both have recorded negative price returns, while NYSE Arca Airline Index has only gained c. 10.5% YTD.
Buoyed by an expanding economy, the premium-focused carrier recently upgraded the revenue forecast for 2019 as it renewed its co-branded credit card partnership with American Express (AXP) till the end of 2029. The revenue diversification plans shield the company from a possible economic slowdown while cheaper fuel supply from the refinery cushions margins from energy price inflation as the fleet transformation continues. Furthermore, the strong balance sheet will allow the company to focus on further expansion with outstanding dividend yield and above-average share repurchases.
Despite the favorable outlook, DAL, in terms of forward PE, continues to trade at a discount to its five-year average trailing PE, suggesting a buying opportunity. However, amid trade tensions, headwinds to the forecast remain as DAL narrows its focus on premium travel, which makes it vulnerable to an economic slowdown.
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