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Bouncing off the 50DMA like it should. Huge gap to fill! GLTA
Marker:
Delta Air Lines, Inc (DAL)
$60.394 up 1.874 (3.20%)
Volume: 6,405,230
Go $DAL earnings look fantastic this morning. Holding $56 Jan Calls and will be clicking the cash register today. People you need to take advantage of this bull market especially during earnings season
Basing here now for next leg up into blue sky territory... Looking Very strong here
Marker:
Delta Air Lines, Inc (DAL)
$55.25 up 1.62 (3.02%)
Volume: 13,564,125
*5 years and now a 5 bagger.
Delta Air Lines, Inc. (NYSE:DAL) Flying Under The Radar
Leading airline stock, Delta Air Lines, Inc. (NYSE:DAL), has been pulling back since mid-October. At that time, DAL stock traded as high as $54.00 a share. Today, DAL stock is trading around $49.00 a share. The stock is now trading below the important 50 and 200-day moving averages. This tells me that the stock is in a weak technical chart position. Traders must now look lower for major chart support.
One lower level that catches my eye is the $45.50 area. This level is where the stock was defended in early September and will most likely be defended again when retested. Traders can look to buy DAL stock around the $45.50 level. It will also be important to place a stop loss under the $44.00 level on a weekly chart close. This trade setup should present a solid risk/reward opportunity with upside around the $56.00 area.
Nicholas Santiago
InTheMoneyStocks
53.03. Gravestone Doji yesterday and spinning top today
Bearish reversal
$DAL has fallen every single day since the 7/15 Ann Coulter incident.
Do you think this is major resistance or higher next week?
Airline Stocks In For A Hard Landing
This morning, most of the leading airline stocks are declining sharply lower. The catalyst for the fall in the airline sector is due to a poor reaction to earnings from American Airlines (NYSE:AAL) and Southwest Airlines (NYSE:LUV). The airline sector is even falling despite lower oil prices so this is a good indication that the sector is headed lower in the near term.
Delta Air lines (NYSE:DAL) is a stock that should be on everyone's radar. This company reported earnings last week and is now close to retesting its 200-day moving average. All indications on the chart are signaling a further decline in the stock over the near term. Trader and investors should keep an eye on the $39.25 level for a potential downside target. This is also an area where the institutional money will likely support the stock. I would be a buyer of DAL stock at the $39.25 level with a stop-loss below $36.00 on a weekly chart close. This should present a solid risk/reward trade setup with the upside target being around $47.00.
Nicholas Santiago
InTheMoneyStocks
New video, Does Buffett use EW: https://goo.gl/ziDs17
Fundamental analysis implies DAL's 6% undervalued b4 earnings Thursday:
Intrinsic Value
Top 10 Stock Picks for 2017 (12/03/16)
Alphabet, Apple, Citigroup, Deutsche Telekom, Disney, Toll Brothers, and Unilever are among the best bets.
By Andrew Bary
Equity investors face a big choice for 2017. Bet on appreciated “Trump” stocks in the hopes of a stronger economy, or focus on more-defensive sectors. Since the election, economically sensitive stocks, banks, and energy producers have risen, while traditionally defensive groups like consumer stocks and electric utilities have suffered amid concerns about higher rates and inflation.
In selecting our 10 favorite stocks for 2017, we leaned toward laggards rather than chase surging stocks at often-high valuations. Our list includes many familiar companies, including Google parent Alphabet (ticker: GOOG), Apple (AAPL), Citigroup (C), Walt Disney (DIS), Merck (MRK), and Delta Air Lines (DAL).
Eight of the 10 stocks are trailing the Standard & Poor’s 500 index as the year winds down, including three European names— Deutsche Telekom (DTEGY), Novartis (NVS), and Unilever (UL). With European bourses having trailed U.S. markets in 2016, many leading European companies offer good value. And except for Alphabet, all of our picks are valued at less than 20 times estimated 2017 earnings. We use a conservative profit estimate for Alphabet that includes stock compensation.
We’d rather play an improving economy with stocks like Toll Brothers (TOL), Citigroup, and Delta, which trade for about 10 times estimated 2017 earnings, than Caterpillar (CAT), which fetches almost 30 times earnings after a 40% gain this year.
Alphabet is a prime example of the Warren Buffett maxim that it’s far better to “buy a wonderful business at a fair price than a fair business at a wonderful price.” Apple is valued like it could go out of business in a decade or so. The much-discussed challenges at ESPN obscure Disney’s strengths in movies and theme parks. Deutsche Telekom amounts to an appealing sum-of-the-parts story, given its valuable majority stake in T-Mobile US (TMUS). And Unilever has one of the most attractive growth stories among large-cap consumer stocks.
Selecting 10 Favorites each year can be humbling. Our choices from last year have trailed the S&P 500 by more than six percentage points on average, hurt by sizable losses in AMC Networks (AMCX) and CVS Health (CVS); see “2016: We’re Not Sorry to See You Go” at the bottom of this page. We’re hoping to improve on that showing in 2017.
ALPHABET IS ONE of the world’s great businesses, and it’s available at a reasonable price after declining during this year’s market rally. The nonvoting shares trade around $750, or about 23 times projected 2017 earnings of $33 a share. Our 2017 estimate includes the company’s enormous $7 billion of annual stock-based compensation. Alphabet and Wall Street prefer to focus on profits that exclude the stock comp. Using that approach, Alphabet is valued at 18 times estimated 2017 earnings of $41 a share.
Alphabet’s effective valuation is lower since it has almost $80 billion in net cash, or about $115 a share. Much of that is overseas and could be repatriated if favorable tax legislation is passed next year. Moreover, the company is absorbing about $3 billion annually in losses from its “other bets,” like self-driving cars. Chief Financial Officer Ruth Porat gets credit for instilling some financial discipline at the company, but there’s a lot more that can be done.
Despite its size, Alphabet remains an impressive growth company, with revenues and earnings per share expected to rise a robust 17% in 2017.
APPLE REMAINS DOMINANT, but it carries one of the lowest valuations among major technology companies, as investors worry about a litany of issues, including a maturing smartphone market and the lack of a big, needle-moving new product. There’s some basis for these concerns, but they appear to be well discounted in Apple’s share price, which at $110 is just 12 times estimated earnings of $9 a share in the current fiscal year ending in September 2017. The price/earnings ratio is closer to nine when factoring in the company’s $150 billion, or $28 a share, of net cash.
“The Street hates hardware companies and is far too bearish on Apple,” says David Rolfe of Wedgewood Partners, a St. Louis investment manager that counts Apple as one of its largest holdings. Rolfe argues that the iPhone 7 has outperformed low expectations and that investors underappreciate the power of the Apple ecosystem, including an installed iPhone base estimated at 500 million to 600 million. Apple gets little credit for its large and growing services business, including its App Store and Apple Pay. Services generated over $24 billion of revenues in the latest fiscal year at a high profit margin.
CITIGROUP HAS LONG been one of the cheapest of the large financial companies, and that position has solidified this year as its shares have trailed its peers. That could change in 2017 if the bank’s returns continue to increase, helped by rising interest rates.
Citigroup, at $57, has risen 10% in 2017, while rivals, including JPMorgan Chase, Bank of America, and Goldman Sachs Group, are up an average of 25%. Citi has trailed the pack in the postelection rally in financials because investors want U.S.-focused companies like Bank of America. Citi gets almost half its revenues outside of the U.S.
Trading for 90% of its tangible book value, Citigroup is the only megafinancial stock still trading below tangible book. Citi fetches just 11 times projected 2017 profits. Bernstein analyst John McDonald noted recently that Citi trades at a 47% discount to peers on price/tangible book and a 25% discount based on price/earnings.
Citi’s management, led by CEO Michael Corbat, has streamlined operations and boosted returns. The bank’s low dividend yield of 1.1% should rise in 2017, and the bank is on track to buy back 5% or more of its stock in the 12 months ending in mid-2017.
DELTA AIR LINES RUNS like a disciplined industrial company, but it’s still valued like an airline. Its shares, around $49, trade for nine times both 2016 and 2017 estimated earnings. Delta has more than halved its net debt since 2009, to $6 billion, and gained an investment-grade credit rating from Moody’s. Delta pays a dividend of 1.7% and is aggressively repurchasing stock. Total capital returns to shareholders this year should total $3 billion, or 8% of its market value of $35 billion.
An industry leader in both operations and pricing, Delta has segmented its customer base through features such as a cheap, basic economy ticket that doesn’t offer passengers a preassigned seat. By cutting first-class fares, it has made them affordable to many affluent fliers. As a result, more than half of Delta’s first-class and business-class tickets are sold rather than given away as upgrades to frequent fliers.
A couple of factors have grounded the stock this year. Earnings have flattened amid a soft transatlantic market, and oil prices have rallied lately. A bullish scenario for 2017 would include a stronger economy leading to improved unit revenue. Delta management believes that its shares deserve to trade like railroads and other transportation companies, which would result in a stock price of about $100. That may be a stretch, but if Delta gets only halfway there, the stock could be up 50%.
DEUTSCHE TELEKOM HAS DECOUPLED from its most valuable asset, T-Mobile US, during 2016, as its U.S.-listed shares have fallen 13%, to $15.60, while T-Mobile’s stock has surged 40%, to $54. After these moves, Deutsche Telekom’s core European telecom business now is valued at about $9 a share, with roughly $6 attributed to its 65% stake in T-Mobile. The core business trades at a discount to European and U.S. peers, and the stock offers a dividend yield of almost 4%.
The company is the leading integrated wire-line and wireless operator in Germany. Bullish analysts like Mathieu Robilliard of Barclays and Robert Grindle of Deutsche Bank have price targets of about $20.
In T-Mobile, Deutsche Telekom controls one of the most attractive takeover targets in the telecom, media, and cable sector. Comcast is a potential buyer, and T-Mobile could take another shot at merging with Sprint if the antitrust environment thaws under a Trump administration.
MERCK’S OUTLOOK IMPROVED markedly in August with the surprise failure of a clinical trial involving a highly touted drug from Bristol-Myers Squibb. That made Merck’s rival drug, Keytruda, the leading immuno-oncology treatment in the large market for lung cancer, the main cause of U.S. cancer deaths.
After rallying about 5% since the Bristol-Myers setback, Merck still looks attractive, trading at $61, or nearly 16 times projected 2017 earnings of $3.87 a share. The stock yields 3.1%. Merck is a top pick of Bernstein drug analyst Tim Anderson, who sees Keytruda potentially generating over $8 billion in annual sales after 2020, up from about $1.5 billion in 2016. “Immuno-oncology should dominate in 2017,” he says. Merck has a broad franchise, including a strong vaccines business and a leading drug for diabetes.
One promising area for Merck is Alzheimer’s. The area has been a graveyard for drug development, highlighted by a recent failed clinical trial for an Eli Lilly drug. Merck’s leading Alzheimer’s drug to prevent the buildup of potentially disease-causing plaque in the brain works differently than Lilly’s treatment. The drug, Verubecestat, is furthest along in its class and should have Phase 3 trial results in 2017. Anderson says hopes are low for the Merck drug, effectively giving investors a “free call” option on what could be a blockbuster drug.
NOVARTIS IS A WIDELY diversified drug company that now trades for under 14 times estimated 2017 earnings of $4.97 a share. The Swiss pharmaceutical giant’s U.S.-listed shares trade around $68 and yield more than 3%. The company is another top pick of Bernstein’s Anderson, who thinks that Novartis can generate 10% compounded annual growth in earnings per share over the next five years. He notes that Novartis is valued at only a small premium to Pfizer and French drug company Sanofi, which have weaker outlooks.
Novartis is down 21% this year, making it one of the worst performers in Big Pharma, amid shortfalls at its Alcon eye-care business and a slower-than-expected launch of its new heart-failure drug Entresto. Anderson isn’t fazed by the issue, projecting that Entresto will become a blockbuster with about $3 billion in annual sales by 2020, up from about $200 million this year.
Novartis gets 25% of its sales from high-growth emerging markets, among the best of its peers, and it’s less dependent on U.S. pricing increases for higher earnings. It has a large generics business, including one of the best biosimilar operations. Anderson calls the Alcon and Entresto problems “fixable” and says Novartis has an underappreciated drug pipeline. He carries a Buy rating and $89 price target on the U.S. shares.
TOLL BROTHERS AND OTHER home builders haven’t participated in the recent rally in economically sensitive stocks, as investors worry about a peak in the housing cycle and higher interest rates—even though single-family home construction is restrained by historical standards and modest interest-rate increases usually haven’t done much to depress housing.
Toll Brothers, the leading maker of luxury homes, looks inexpensively priced at about $29, or less than 10 times projected earnings of $3.12 a share in the year ending in October 2017. (Toll will report fiscal-2016 results on Dec. 6.) Earnings are expected to be up 20% in the current year. Toll trades for just 1.2 times its most recent book value and at its projected year-end 2017 book of $29. Toll repurchased 7% of its shares in the first three quarters of the recent fiscal year.
With its luxury focus, Toll is the most differentiated of the major home builders. Its average home price of $860,000 is double that of its major rivals, which tend to focus on first-time buyers in Sunbelt markets.
Of concern is Toll’s New York–focused condo business, which generated almost 20% of its earnings this year. The New York luxury condo market has been soft, but Toll insists that its projects are doing OK. Those fears give investors a chance to buy one of the country’s best home builders at around liquidation value.
UNILEVER’S U.S.-LISTED SHARES look appealing after a 20% drop from a September high, driven by mildly disappointing third-quarter results, a stronger dollar, and the rotation into cyclical stocks. The third-largest consumer-products company in the world behind Procter & Gamble and Nestlé, Unilever isn’t as well known to U.S. investors but probably has a better outlook than P&G, thanks to its exposure to high-growth emerging markets, where it gets about 60% of its revenues. Its brands include Dove, Hellmann’s mayonnaise, Lipton Tea, and Ben and Jerry’s ice cream.
Unilever isn’t cheap at $39, or 18 times projected 2017 earnings, but it trades at a discount to its peers. The shares yield 3.6%. An Anglo-Dutch company like Royal Dutch Shell, Unilever has two U.S.-listed shares, tickered UN and UL. We prefer UL, which is based on the United Kingdom shares and has no withholding tax on the dividends.
Under CEO Paul Polman, the company has kept a tight rein on costs and emphasized higher-growth household products like soap and laundry detergent over food. “We believe that Unilever can deliver strong and consistent operating performance,” wrote Bernstein analyst Andrew Wood in a recent client note. He sees nearly 5% sales growth and a 9% gain in earnings per share in 2017. His price target is about 30% above the current share price.
WALT DISNEY IS A CONSUMER and media powerhouse with one of the world’s best brands. The shares, down 6% this year, to $99, don’t reflect its strengths in movies, theme parks, consumer products, and cable television.
Investors worry about the impact of cord-cutting and higher sports-programming costs on Disney’s ESPN, but both of those issues look manageable, and ESPN is far from everything at Disney, accounting for an estimated 35% of total earnings. “What distinguishes Disney is the quality of its content and the way consumers associate that content with Disney,” says Anthony DiClemente, an equity analyst at Nomura/Instinet who carries a Buy rating at a $110 price target on the shares. Disney faces a well-advertised profit lull in its current fiscal year ending in September 2017, when earnings per share may grow just 4% after an 11% rise in fiscal 2016. This fiscal year, it will be lapping the huge profits it had in its studio division last year, when it had four films that each grossed over $1 billion at the box office.
DiClemente sees a resumption of double-digit profit growth in fiscal 2018, as the studio churns out four Marvel movies, three animated features from Disney and Pixar, and two Star Wars films. Disney shares now trade for a reasonable 15 times that 2018 estimate. There’s also the possibility of a dramatic corporate event like a purchase of Netflix, or a scenario tossed out recently by media mogul John Malone, who said Disney could be sold to Apple after spinning off or selling ESPN. Farfetched? Probably. Impossible? No.
http://www.barrons.com/articles/top-10-stock-picks-for-2017-1480748688?mod=BOL_hp_highlight_2
Delta Air to sell gasoline and diesel as losses at its refinery climb (12/02/16)
By Chris Prentice and Jarrett Renshaw
Delta Air Lines Inc is preparing to market gasoline from a refinery it owns outside Philadelphia, signaling a shift in strategy toward managing the plant as a commercial refiner rather than a dedicated jet fuel supplier.
Delta became the first airline to own a refinery when it bought the shuttered plant in 2012, hoping to turn the facility into its own jet fuel supplier and capitalize on cheap oil supplies from a boom in U.S. shale output.
Instead of marketing the gasoline and diesel from the 185,000 barrels per day Monroe Energy plant, until now Delta has swapped the billions of dollars of motor fuel for jet fuel under a contract with Phillips 66 that is set to expire next year.
Now, Monroe is ramping up to sell small volumes of blended gasoline and ultimately diesel at a distribution center owned by Sunoco Logistics Partners outside Philadelphia, a source familiar with the plan told Reuters.
The sales will allow Monroe to benefit from motor fuel profit margins, an attempt to turn around a loss-making plant at a difficult time for the refining industry along the U.S. East Coast, added the source.
The region's refiners are fighting to survive, as they rely on foreign waterborne crude for supply. Two plants in the region have been shut in the past decade.
The company plans to increase sales volumes, including of diesel, over the next year after the Phillips 66 swap agreement expires, according to the source, who asked not to be identified because he was not authorized to speak with the press.
A Delta spokesman declined to comment on the plan and a Monroe Energy spokesman said the company does not discuss operations.
"At this point, they may feel they have better economics to sell the gasoline outright," said Robert Mann, a former airline executive and principal at R.W. Mann & Company, Inc.
A commercial refiner would look at profit margins for each fuel, which vary seasonally, and adjust production to maximize the output of the fuel with the best margin. Delta has been maximizing jet fuel output, regardless of variations in margins.
That may have saved Delta money on jet fuel supplies, but cost it potential profit from producing other products.
Mann said if the refiner abandons efforts to maximize jet fuel supply, Delta may reconsider whether owning the plant is worthwhile.
DRAG ON PROFITS
After a few successful years, the refinery has lost money in 2016 amid an industry-wide slump that has hit East Coast refiners the hardest. The refinery lost $83 million in the first nine months of the year compared to $282 million in profits last year.
Monroe Energy slashed employee bonuses to save money earlier this year. But the refiner's manager, Jeff Warmann, told employees then not to worry about mounting losses because the real goal was to pump jet fuel and drive prices down.
Monroe, like other merchant refiners, has also taken a hit from rising costs to meet U.S. annual biofuels requirements. Those require refiners who cannot blend biofuels, as mandated by the government, to buy paper credits from those that can. Those credits, called RINs, have soared in cost in the time Delta has owned the plant.
In the first three quarters of this year, Monroe paid $130 million to purchase RINs, nearly double the $67 million during the same time the year earlier.
Blending ethanol into gasoline will allow Monroe for the first time to generate credits, though it will still meet just a fraction of its total biofuels obligation. Delta has been embroiled in a years-long lawsuit with the Environmental Protection Agency over the scheme, which the airline says are too heavy a burden.
http://www.reuters.com/article/us-usa-refinery-delta-air-idUSKBN13R2F3
I think Delta will soon be in for a world of hurt when investors realize they let that trump supporter fly, putting all other passengers in danger
Warren Buffett's Berkshire Hathaway Discloses New Investments in Airlines
Warren Buffett's Berkshire Hathway Inc. on Monday disclosed new stakes in three of the largest U.S. airlines.
Berkshire Hathaway said in a regulatory filing that had taken stakes in American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc., with the latter scheduled to hold its investor day on Tuesday.
Shares of airlines surged earlier this year, thanks in part to sliding oil prices, but their performance recently has been mixed. For the year, the Dow Jones U.S. Airlines index is up 0.7%.
It wasn't clear if the decision to invest in airlines came from Mr. Buffett or one of his stock-picking lieutenants.
Mr. Buffett famously derided investing in airline stocks after suffering losses from purchasing preferred stock in what was then known as USAir back in 1989.
http://ih.advfn.com/p.php?pid=nmona&article=72911292
*I think its safe to say WB didn't make this decision but whoever it was within BRK they're 4 years late to the party.
Marker:
Delta Air Lines, Inc (DAL)
$48.61 down -0.29 (-0.59%)
Volume: 8,665,030
Thank you for the concession. ;)
DAL has outperformed C over that time frame.
Fair enough.
Honestly, I was a little surprised when posting the price change earlier this week. I expected DAL and the other airlines to be a little flatter since fuel costs have remained low in a long term perspective and fairly stable in the short term.
I will openly admit that I do not follow airlines as closely as other industries, but do pay much more attention to DAL over DFW-based AAL. Why? DAL does, or maybe, should have a competitive advantage over the others when it comes to fuel costs because it operates a former COP refinery. Not trying to poke fun at DAL here. I am truly interested in seeing how that investment plays out in the long run, especially when (or if) crude oil returns to more normal prices.
Not sure why the comparison to C since it's a bank.
Since you opened the door, C started life back in 1812 as the City Bank of New York. The number of airlines in the history of the world is very small when compared to the number of banks that have opened their doors. However, C not only survived the Great Recession but also the Great Depression, something the management and boards of a much larger number of banks were not able to do. Even Banca Monte dei Paschi di Siena in Italy, which opened in 1472, may not survive.
Since 1990, 189 airlines have failed. DAL has also suffered through tough times. It too filed for bankruptcy on 9/14/05. So, legacy DAL shareholders were left holding the bag.
DAL should be considered the "New" Delta Air Lines.
Will C be around in another 204 years. None of us will know. Life is short.
No doubt about it. Since 12/17/2015 its been bumpy for the entire globe in every industry sector.
Take C for example...they're 52 week high of $55.80 was on 11/10/2015
And their 52 Week Low was just 13 weeks later at $34.98 on 2/11/2016
How do they compare over a 10 year investment;
On 5/31/2007 C was: $544.90
On 5/31/2007 DAL was: $19.05
A 10 year investment on DAL shows it up +94%
A 10 year investment on C shows it down a whopping -370%
The moral to the story is it's a lot bumpier in Citibanks boardroom than it is at 35,000ft in a DAL plane.
Bumpy ride for investors since 12/17/15.
DELTA AIR LINES INC (DAL)
Last Trade [tick] 37.0600 [-]
52 Week High 52.7700 on 12/17/2015
52 Week Low 32.6000 on 06/27/2016
Phillips 66 cuts output at Linden refinery amid weak margins: source (8/30/16)
By Jarrett Renshaw
Phillips 66 has cut production by roughly five percent at its 238,000 barrel-per-day refinery in Linden, New Jersey, amid weak refining margins, according to a source familiar with the plant's operations.
Phillips 66 joins Monroe Energy's 185,000 barrel-per-day refinery in Trainer, Pennsylvania, in making economic run cuts on the East Coast. Monroe Energy, a subsidiary of Delta Air Lines, continues to run the refinery at roughly 150,000 bpd following run cuts that began in July, a source said Tuesday.
Phillips 66 did not immediately return a request for comment.
The U.S. gasoline crack spread, an indicator of how much refiners make from converting a barrel of oil into a barrel of gasoline, remains at its lowest level in the past five years.
The U.S. diesel crack spread also remains at five-year lows.
U.S. and global refining margins have been hurt by historically high gasoline and diesel inventories. Refining executives and analysts across the globe are predicting refiners are going to be forced to scale back production to reduce inventories, balance the market and boost margins.
East Coast refineries see some of the weakest margins due in part to their supply constraints, and experts predict they would be among the first to cut runs.
Philadelphia Energy Solutions, the largest East Coast refinery, is currently running at full capacity, a source told Reuters Tuesday. It was not immediately known whether PBF Energy has made cuts at either of its East Coast refineries, one in Delaware City, Delaware and the other in Paulsboro, New Jersey.
PBF plans on shutting down the 55,000 bpd gasoline-making unit at its Paulsboro refinery in mid-September for up to eight weeks of planned work.
http://www.reuters.com/article/us-refinery-operations-phillips-66-baywa-idUSKCN11523G
You'll have to wait a long time...moving up.
Can't wait to see this shit company tank. Good thing they aren't running a hospital.
Decided to buy some at $38 today and plan to add if it goes below $35
Not saying DAL is trash. I think it's a great company and in my opinion one of the industries best. Specifically, when it comes to being in tune with their customers. Delta is the best.
However, I have not seen what is currently happening to DAL before. Every day this week it has lost 3%. Hard to imagine that considering all the positives that are going on within the company.
I do believe there is a lot of value being formed here. Like anyone, just trying to figure out why it's getting beat up so bad as of recent.
I will say, considering DAL is the market leader and is aggressively paying off debt... This one will outperform in the long run. By 2020 debt will be under 1X earnings, and management targets to payout 50-70% of FCF. With FCF close to 4B this year, we are looking at a 10% FCF yield at the current prices. That screams value for a company that's profits aren't going away any time soon
'Insane' U.S. diesel, gasoline prices hard to crack for refiners (6/10/16)
The hot summer months are the boom time for U.S. gasoline sales, and naturally the season when refiners are all-in on pumping out the motor fuel for drivers on U.S. highways.
But an unusual glut of gasoline - just as refiners are ramping up to produce more - has caught them on the wrong side of distillate margins for the second time in less than 12 months.
Instead of minting bigger profits on refining gasoline, they are seeing margins shrink because of oversupply, potentially leading to disappointing earnings. U.S. gasoline inventories are currently about 9 percent above their five-year average, according to data from the U.S. Energy Information Administration.
The gasoline oversupply has presented refiners with the unusual dilemma of whether to switch summer output towards distillates.
It is a mirror image of what happened with distillate products in the winter, when weak demand for diesel and heating oil left a big surplus in those products, and hammered independent refiners' earnings at a time when those products are normally in high use.
Typically, gasoline trades at a premium to diesel during the hot months of June, July and August. However, on Wednesday, gasoline's premium to diesel and heating oil 1RBc1-HOc1 fell to a mere one cent, down from a peak of 29 cents in early April.
"Gasoline is on the verge of trading under diesel... in JULY!!! That's insane," a trader at a U.S. bank said in an instant message.
The industry as a whole has been churning out gasoline hard for the past year, as a golden period of refining margins emerged out of the ashes of the crude oil rout.
A mild winter led to swelling distillate stockpiles, resulting in a rare winter occurrence where heating oil traded at a discount to gasoline, catching refiners off-guard at a time when they typically increase distillate production to meet high demand for heating oil. As a result, independent U.S. refiners reported their worst quarterly profits in five years in April.
With better margins for gasoline, refiners moved in that direction. Phillips 66 CEO Greg Garland said in an April earnings call that the company had been running "pretty much max gasoline," a point echoed by several other CEOs that month.
Despite strong demand, gasoline margins dipped in recent weeks as traders feared high imports and rising supply would make it harder to work through record inventories.
"Refiners killed the gasoline golden goose this year by overproducing. They were actually making summer gasoline during winter. That says it all," said Nevyn Nah, oil products analyst at Energy Aspects.
Earnings per share at top U.S. refiners, including Phillips 66, Valero and Marathon Petroleum, are expected to fall well short of analysts' expectations in the second quarter, according to StarMine, a unit of Thomson Reuters.
The surprise strength in diesel has again caught refiners off-guard. Prices of distillates, which include heating oil and diesel, have seen an unusual surge in recent weeks due to robust overseas demand combined with lower domestic production. Refinery strikes in France have also propelled prices forward.
"This (strong distillate demand) will continue to run into back end of June. We still see strong demand into July right now, so I think it may have an even longer bull run," an East Coast refining source said.
Seasonally, the last time gasoline traded at a discount to diesel was in 2013. If diesel's premium does return, refiners will likely make a switch, said Mark Broadbent, Wood Mackenzie's senior research analyst for refining and oil product markets.
Delta Air Lines Inc is currently considering pulling back the reins on gasoline output to boost diesel production, according to a source familiar with the plant's operations.
Others think it might not be the easiest or the best strategy to switch just yet. Gasoline is still the marquee product for the summer, said Tom Kloza, global head of energy analysis at OPIS.
"If I were in a refinery meeting in the next 60 days, there's no question I would say, 'Let's make as much gasoline as possible,'" said Kloza.
http://www.reuters.com/article/usa-refineries-gasoline-idUSL4N1904WT
Marker:
Delta Air Lines, Inc (DAL)
$42.90 up 0.5 (1.18%)
Volume: 6,657,319
Quarterly Report (10-q)
Date : 04/14/2016 @ 4:14PM
Source : Edgar (US Regulatory)
Stock : Delta Air Lines, Inc. (DAL)
Quote : $48.49 0.0 (0.00%) @ 4:00AM
[....]
EPS: $1.22 for Q1 2016 as compared to $0.91 for Q1 of 2015
[....]
17MM shares bought back so far in 2016.
[....]
http://ih.advfn.com/p.php?pid=nmona&article=71127319
* All things considered a very good quarter.
A 5 year chart on DAL reveals that it has attained the enviable distinction of being a "10 Bagger". Very impressive despite the world glut on oil and its upheaval on the airline industry. I love it and want some more of it!
On the other hand had an investor put the same dollars into a bank like Citi [C] for example that same 5 year return would be a "0 Bagger". Not only that but losses on loans to E&P oil company will mount into the billions and have yet to hit C's books.
Wall St. invented something Investors can use when the story on a company changes - its called the sell button. I'm not advocating a sell here, far from it, just a reminder that it's never good to 'marry' a company when you can 'rent' it!
Marker:
Delta Air Lines, Inc (DAL)
$47.84 down -1.07 (-2.19%)
Volume: 9,138,976
Airlines Pull Back on Hedging Fuel Costs (3/20/16)
Reappraisal of costly strategy comes after some carriers get burned by low oil prices
By Susan Carey
After decades of spending billions of dollars to hedge against rising fuel costs, more airlines, including some of the world’s largest, are backing off after getting burned by low oil prices.
When oil prices were rising, hedging often paid off for the airlines, helping them reduce their exposure to higher fuel costs. But the speed of the 58% plunge in oil prices since mid-2014 caught the industry by surprise and turned some hedges into big money losers.
Last year, Delta Air Lines Inc., the nation’s No. 2 airline by traffic, racked up hedging losses of $2.3 billion, while United Continental Holdings Inc., the No. 3 carrier, lost $960 million on its bets.
Meanwhile, No. 1-ranked American Airlines Group Inc., which abandoned hedging in 2014, enjoyed cheaper fuel costs than many of its rivals as a result. “Hedging is a rigged game that enriches Wall Street,” said Scott Kirby, the airline’s president, said in an interview.
Now, much of the rest of the industry is rethinking the costly strategy of using complex derivatives to lock in fuel costs, airlines’ second-largest expense after labor.
Smaller U.S. carriers, including JetBlue Airways Corp. and Spirit Airlines Inc., have been minimizing their hedges, according to their public filings. Even in Europe, where carriers have been big advocates of hedging, some airlines are scaling back.
“We don’t need to hedge that risk like we used to,” said Gerry Laderman, acting chief financial officer of United. “That doesn’t mean that hedging is off the table. We are looking at formulating…a different way of thinking about it.”
In hedging, airlines enter into financial contracts that get more valuable as oil or fuel prices rise, offsetting the run-up in prices. But the reverse is also true. The value of these contracts fall when prices fall, creating trading losses—in some cases large ones—and canceling out the benefit of the cheaper fuel.
Oil prices, which peaked at $147 a barrel in 2008, are currently at around $41 a barrel, after rising from a 13-year low of $26 in mid-February. Some analysts and traders think the recent rally won’t hold amid a global oil glut, and that prices will remain weak for some time.
Another factor in the hedging pullback: a round of megamergers, capacity cuts and more fuel-efficient aircraft have fattened the industry’s profits, leaving carriers in better financial shape—and less vulnerable to a spike in fuel prices.
Airlines aren’t the only companies that have relied on hedging. Meat processors and other food manufactures might hedge to protect themselves from price swings of key raw materials like hogs or wheat. But airlines’ exposure to fuel costs can be more obvious to consumers, who often feel it in the form of higher ticket prices and international fuel surcharges when oil prices rise.
American swore off hedging after merging with US Airways Group. Most of its postmerger executives hail from US Airways, which abandoned the futures markets in 2008. Deep discounter Allegiant Air stopped hedging in 2007. Canada’s low-fare WestJet Airlines Ltd. gave it up a few years ago.
Delta, which bought its own refinery in 2012 to control some of its supply, recently closed its hedge book. It expects to book further losses of $100 million to $200 million in each of the final three quarters of this year.
While Delta said it remains committed to hedging, it hasn’t had a gain from the practice since the second quarter of 2014. But the company still expects the weaker oil market to pare this year’s fuel tab by $3 billion from 2015, Paul Jacobson, its chief financial officer, said in an interview.
United’s hedge position, which covers 17% of its fuel consumption this year, stood at a loss position of $225 million in January. Most of that deficit stems from hedges placed in 2014. United hasn’t added any new hedges since last July. “This is the least hedged we’ve been in quite a while,” said Mr. Laderman, the CFO.
Asian and European airlines have tended to rely more heavily on hedging because they must spend U.S. dollars to buy fuel but collect most of their revenue in other, and recent weaker, currencies. In Europe, after “huge” hedge losses last year, some of the largest carriers are hedging less of their future consumption, said Andrew Lobbenberg, an analyst for HSBC Bank PLC.
While a geopolitical crisis could quickly push up oil prices again, experts said airlines with good credit could easily jump back into the futures market, although it would be costly.
“It’s always possible we’d hedge in the future,” Bob Fornaro, chief executive of Spirit Airlines, which is unhedged for this year.
Southwest Airlines Co. ’s successful hedge strategy in the 2000s culminated in a $1.3 billion hedge gain in 2008. Over the next few years, however, Southwest routinely lost money on its hedges. It estimated in January that its 2016 hedge book—for 20% of its consumption—was $1 billion underwater, meaning the airline will pay 50 cents to 60 cents more per gallon for jet fuel than some rivals.
Even so, Chris Monroe, vice president and treasurer, estimates that hedging shaved $2 billion off Southwest’s fuel bill between 2001 and 2015. He said the carrier continues to see value in it. “It’s like having a teenage-boy driver living right in the middle of your income statement,” he said. “You need some insurance on him.”
http://www.wsj.com/articles/airlines-pull-back-on-hedging-fuel-costs-1458514901
DAL: Why Are These Five Stocks Tanking Today?
Published on January 5, 2016 at 3:03 pm by OMAR VENERIO in Market Movers,News
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With all three indices in the red today, several stocks opened lower and registered considerable losses in morning trading. In this article we are going to take a look at some of the top losers on Tuesday and the reasons behind their declines. Namely, we are going to discuss MannKind Corporation (NASDAQ:MNKD), Delta Air Lines, Inc. (NYSE:DAL), Republic Airways Holdings Inc. (NASDAQ:RJET), Whiting Petroleum Corp (NYSE:WLL), and Joy Global Inc. (NYSE:JOY). Let’s find out why investors are selling these five stocks today. We’ll also take the opportunity to examine the relevant hedge fund sentiment toward these stocks.
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks have managed to return 102% since September 2012 and outperformed the S&P 500 Index by 53 percentage points (see more details here).
Leading the way is MannKind Corporation (NASDAQ:MNKD), whose stock has plunged by 40%, after the announcement that Sanofi SA (ADR) (NYSE:SNY) had decided to end its agreement with MannKind and thus ended the commercialization of the inhaled insulin Afrezza. In 2014, Sanofi paid $150 million for the global rights to Afrezza and committed to pay a larger amount subject to Afrezza reaching certain goals. However, the deal was ended after Afrezza’s net sales were weak during the January-September period.
Among the funds we track, MannKind Corporation (NASDAQ:MNKD) lost some popularity during the third quarter, with a total of 13 funds reporting long positions in the company, versus 11 funds a quarter earlier. However, these funds amassed 3.30% of the company’s outstanding stock heading into the fourth quarter. Jonathan Savitz‘s Greywolf Capital Management reported owning 9.08 million shares of MannKind Corporation in its latest 13F filing, having decreased its stake by 19% over the quarter.
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In Tuesday morning trading, Delta Air Lines, Inc. (NYSE:DAL)’s stock has declined by nearly 1% after reporting a decline of 5% on the year in consolidated passenger revenue per available seat mile for December. The appreciation of the U.S. dollar and Thanksgiving holiday had a negative impact on the metric. Now, the company forecasts a unit revenue decline of 1.5% in the fourth quarter. Among the funds we follow, 109 reported long positions in Delta Air Lines, Inc. (NYSE:DAL) as of the end of September, down by five funds from a quarter earlier. Alex Snow‘s Lansdowne Partners is the largest shareholder of the company among the investors we follow, owning 26.57 million shares, according to its last 13F filing.
Marker:
Delta Air Lines (DAL)
$50.355 up 1.235 (2.51%)
Volume: 8,727,987
*DAL is back on track to make new all-time highs. March 2, 2009 DAL was $4.06 @ share.
Delta Air Lines Plans To Cut Its Office Workforce - http://www.businessfinancenews.com/24708-delta-air-lines-inc-plans-to-cut-its-office-workforce/
@Timothy Smith: Delta Air Lines (NYSE:DAL) is running its Trainer, Pa., oil refinery at a near-record 110% of capacity, Reuters reports, in a sign of the surprisingly strong summer profits U.S. refineries are generating.
The refinery reportedly has been running at a clip of ~204K bbl/day for the past month, resulting in higher yields of gasoline and distillates; the plant's nameplate capacity is 185K bbl/day.
China Eastern and Delta solidify strategic partnership
Source: PR Newswire (US)
SHANGHAI and ATLANTA, July 27, 2015 /PRNewswire/ -- China Eastern Airlines and Delta Air Lines today signed an agreement to expand their partnership and better connect Delta's global network with China Eastern, one of the leading airlines in China. The agreement will include a $450 million investment by Delta to acquire a 3.55 percent stake in China Eastern.
China Eastern and Delta solidify strategic partnership
This move marks a significant step in the airlines' collaboration and partnership that will allow Delta and China Eastern to compete more effectively on routes between the U.S. and China, provide more travel options for customers in both countries and make joint investments in the customer experience.
"The execution of the Subscription Agreement and the launching of commercial cooperation plan by China Eastern and Delta indicate significant strategic moves of China Eastern to comprehensively reform further, actively explore and develop mixed ownership economy, and actively promote globalized development," said Shaoyong Liu, China Eastern CEO. "The cooperation of the parties is based on a global vision and joint strategic blueprint. The parties will take advantage of their respective route networks, flight services, relevant businesses and advantageous resources to fully connect the world's two top economies as well as two top air transportation markets. The parties wish, through excellent operation and international cooperation, to optimize customer experience, enhance the parties' global competitiveness and promotes the development and revenue growth of both parties."
"Delta's relationship with China Eastern is long-standing. We share a vision that will create the most profitable, enduring franchise between the U.S. and China, with world-class customer service," said Richard Anderson, Delta CEO. "For the past three years, Delta has welcomed members of the China Eastern team at our headquarters for sharing best practices and work study opportunities. We have learned much from one another already and look forward to deepening our already effective partnership."
China Eastern, with its wholly owned subsidiary Shanghai Airlines, and Delta currently operate codeshare flights on 30 domestic routes in the U.S., 43 domestic routes in China and seven trans-Pacific routes between China and the U.S. China Eastern serves the three largest U.S. markets, with four nonstop flights from Shanghai and Delta serves the three largest cities in China with six daily non-stop flights from the U.S.
China Eastern and Delta continue to strengthen cooperation and support each other in the China-U.S. market through greater access to each other's networks and an improved customer experience. Among recent improvements:
China Eastern and Delta have expanded their joint China-U.S. offering – further cementing their position in the largest market to/from Shanghai – with Delta's recent addition of new Los Angeles to Shanghai service.
Delta's recent move to Terminal 1 at Shanghai's Pudong Airport to co-locate with China Eastern and Shanghai Airlines has resulted in more convenient connections and a seamless airport and baggage experience for customers.
Newly developed joint corporate sales provide more competitive products to customers in China and the U.S.
Equity investment
As part of the enhanced strategic partnership, China Eastern and Delta entered into a conditional subscription agreement where Delta will invest $450 million in China Eastern's H-shares, which trade on the Hong Kong Stock Exchange. The investment equals approximately 10 percent of China Eastern H shares and [3.55] percent of the total shares of China Eastern. Delta also will be entitled to an observer seat on the China Eastern board of directors. The agreement is conditioned upon achievement of a final marketing agreement and approval by each carrier's board of directors.
"The cooperation between China Eastern and Delta is a strategic cooperation between two excellent airlines which connect the world's two top economies as well as two top air transportation markets. We're fully confident in the prospect of the cooperation," said Shaoyong Liu, the Chairman of China Eastern.
"Delta's equity investment in China Eastern is an investment in the future success of the partnership," Anderson said. China is the second largest travel market from the US and is projected to grow more than twice the global average, becoming the largest market from the U.S. in the next few years.
China Eastern in the U.S.
China Eastern will operate 35 weekly departures to 4 destinations in US from Shanghai, 2 flights a day to Los Angeles, daily to New York, San Francisco and Hawaii, also 3 flights a week from NanJing to Los Angeles. China Eastern operates Luxurious new 777-300ERs on routes between China and North America, which will be a major market for China Eastern over the future years. China Eastern plans to open new routes to North America and also boost frequencies on existing routes.
Delta in China
Delta will operate 28 weekly departures to Shanghai this summer. Delta also offers daily service to China's capital, Beijing, from Seattle and Detroit and to Hong Kong from Seattle. Delta has grown its China network by nearly three times in the past five years.
The partnership with China Eastern is part of Delta's broader strategy to collaborate and expand services to China and offer the most robust global airline network to become a more prominent U.S. carrier while continuing to offer the most robust network choices of a U.S. global carrier.
Delta is making significant investments to build the most Chinese-friendly U.S. airline. Chinese travelers are well served with local language options on delta.com, at airport self-service kiosks and among in-flight entertainment selections. The airline has Chinese-speaking flight attendants on every flight to and from China and offers Chinese cuisine among its in-flight meal options. Delta launched its official WeChat account to provide Chinese customers with in-language flight information, marketing promotions and tips for popular Delta destinations through China's most popular SNS service.
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