How Delta Is Tackling Three Big Business Risks
Delta Air Lines (NYSE: DAL) enjoyed a solid 3% bump in its share price on Wednesday after reporting fourth-quarter 2019 earnings that included an impressive revenue advance of 6.5% to $11.4 billion, and an accompanying 7.8% improvement in net income, to $1.1 billion. But in line with other airline carriers, Delta has yet to command a premium to the market: Shares trade at just 8 times forward earnings.
Why hasn't vibrant earnings power been reflected in Delta's stock price? Part of investors' hesitation can be traced to a fear that the cyclical airline business will be one of the first industries to suffer should the U.S. economy slip into a recession. Delta has managed, however, to alleviate some of the risk associated with a cyclical downturn. Below, we'll discuss two of Delta's actions that will mitigate the impact of a potential economic slowdown, as well as its work on one additional general business risk, using comments drawn from the company's post-earnings conference call on Tuesday.
Delta's investment-grade balance sheet remains an important competitive advantage. Including the debt we raised during the quarter, our leverage ratio was 1.7 times at year-end. This puts us at the low end of our targeted adjusted debt-to-EBITDAR range of 1.5 to 2.5 times.
Source Fool.com
