Delta Air Lines, Inc. (DAL) shares rose nearly 5% on Thursday – and jumped a further 1.5% in early hours on Friday – after the company reported better-than-expected fourth quarter financial results. Revenue rose 8.4% to $10.25 billion – beating consensus estimates by $90 million – and net income of $0.96 per share beat consensus estimates by seven cents per share. The company also boosted its guidance for the full year due to tax reform.
The move came a few days after American Airlines Group Inc. (AAL) and United Continental Holdings, Inc. (UAL) reported better-than-expected unit revenue for the fourth quarter. For its part, Delta reported passenger unit revenue that jumped 4.2% during the quarter, as well as cargo revenue that rose 14.4%. Management plans to continue boosting its top line by 4% to 6% while improving its cost trajectory and integrating its partner network. (See also: Delta Posts Fourth Quarter and 2016 Earnings.)
From a technical standpoint, the stock broke out from upper trendline and R1 resistance at $57.97 toward R2 resistance at $59.95. The relative strength index (RSI) moved to overbought levels at 70.97, but the moving average convergence divergence (MACD) could see a near-term bullish crossover. This could signal the start of a new trend higher, with prior trendline and R1 resistance serving as new support levels.
Traders should watch for a brief period of consolidation around R2 resistance at $59.95, which could moderate the RSI before a possible breakout from these levels to fresh highs. If the stock breaks down from trendline and R1 support, traders could see a move back down to the lower trendline and pivot point support at around $54.87. The bright spot is that many analysts have become bullish on airlines as unit revenue has improved. (For more, see: Delta Gives Massive Order to Airbus Over Boeing.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.