Is it Time to Buy Into This Airline?

With shares of Delta Air Lines (NYSE:DAL) trading around $9.64, is DAL a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework. Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

If you haven’t heard yet, hurricane Sandy is having its way with the East Coast and has grounded as many as 9,000 flights. Delta has cancelled at least 2,100 flights between Sunday and Tuesday morning, but could see more cancellations if the storm persists into Wednesday.

Delta released third quarter 2012 earnings on October 24. Earnings per share came in at $1.23. Revenue grew 1 percent year over year to $9.92 billion. Passenger revenue for domestic flights was up 4 percent for the same period, while consolidated passenger revenue was up 1 percent. Shares fell nearly 4 percent by the end of the week.

The airline paid an average of $3.14 per gallon for fuel, inclusive of a $0.03 per gallon hedging loss associated with production from the 185,000 barrel per day Trainer refinery in Pennsylvania that it acquired earlier in the year. The refinery is expected to break even or generate up to $25 million in the fourth quarter.

T = Technicals on the Chart are Strong

As of October 29, 2012, the stock price is 3.15 percent below its 20-day simple moving average, or SMA, 1.93 percent above its 50-day SMA, and 4.30 percent below its 200-day SMA.

Since the beginning of 2012, the stock price has been in an upward trend, gaining 19.90 percent this year to date, and 13.28 percent year over year.

As CEO Richard Anderson said in the third-quarter press release, “With a more stable financial foundation, we have moved our focus beyond short-term profit gains to positioning ourselves for long-term margin expansion, sustained profitability and shareholder returns.”

The stock price is still down 30.60 percent for the last two years and 51.63 percent for the last three. Delta – and the entire industry – has by no means fully recovered from the crisis yet. Southwest Airlines (NYSE:LUV) was the only major carrier not to file for bankruptcy. United Continental (NYSE:UAL) and JetBlue Airways (NASDAQ:JBLU) are both down over 25 percent for the last two years.

E = Earnings Are Increasing Quarter over Quarter

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 19,154 22,697 28,063 31,755 35,176
Diluted EPS ($) 4.08 (19.08) (1.50) 0.70 1.01

(Fiscal year is January-December.)

Quarter Sept. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 June 30, 2012 Sept. 30, 2012
Revenue ($) in millions 9,847 8,391 8,413 9,732 9,923
Diluted EPS ($) 0.65 0.50 0.15 (0.20) 1.23