States posted a bigger-than-expected drop in new claims
Shares of Delta Airlines found themselves under pressure after several analysts cut their ratings on airlines stocks. The common thesis is that the next year will be a “transition year”, so investors should not expect strong performance from airlines.
Currently, analysts expect that Delta Airlines will report a loss of $3.9 per share this year. The company is expected to return to profitability in the next year and report earnings of $4.1 per share, so the stock is trading at less than 11 forward P/E.
It should be noted that earnings estimates for Delta Airlines have been declining in recent weeks, but this did not put any pressure on the stock which managed to gain upside momentum in the second half of September.
It is obvious that the recovery of the airline industry depends on the trajectory of the coronavirus pandemic and the related restrictions imposed by governments.
Recent data indicates that the number of new cases in the world is falling, but it remains to be seen whether countries will be ready to fully open up their borders for international travel, which is an important component of airlines’ profits.
As usual, the stock market will try to predict future results instead of looking in the rear view mirror, so Delta Airlines stock will be more sensitive to general market sentiment rather than the company’s near term financial results.
However, it should be noted that 11 forward P/E does not look too expensive in the current market environment, so the stock may get some support from value-oriented investors who believe in the successful recovery of the airline industry and are ready to bet on the pent-up demand for international travel.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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