Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Delta Air Lines, Inc. (DAL), United Continental Holdings Inc (UAL): A Book Value Comparison Creates Two Different Camps of Airlines

Page 1 of 2

Among the valuation measures investors use to analyze a company’s stock is book value. This value gives investors an approximate feel for what the company would be worth if sold off piece by piece with all parts valued near their full amount. Of course, there are some flaws with this technique; companies can artificially inflate book value or book value does not always fully reflect a company’s potential. However, for investors interested in including book value in their valuation toolbox, airlines are a prime example of how one industry can have so much variation in valuation.

Delta Air Lines, Inc. (NYSE:DAL)

Above and below book value

While some industries tend to follow a pattern whereby most companies have about the same price to book valuations, airlines are exceptions to this rule as evidenced by the table below:

Airlines Trading Above Book Value Airlines Trading Below Book Value
Delta Air Lines (NYSE:DAL) – negative book valueUnited Continental Holdings (NYSE:UAL) – 116 times book value

US Airways Group (NYSE:LCC) – 3.3 times book value

Republic Airways Holdings (NASDAQ:RJET) – 1.1 times book value

Air France – 0.60 times book valueSkyWest (NASDAQ:SKYW) – 0.54 times book value

Table data from, earnings data from

To be fair, more airlines do trade above book value than below book value, but the variation in airline price/book ratios begs an explanation as to why this is the case.

Near the top of the list is earnings. Investors looking at the table will notice that all three non-bankrupt American legacy carriers are trading above their book value. Followers of Canadian carriers will note that Air Canada trades well above its book value as well. Earnings strength is a major factor at play here, and the outlook for legacy airline earnings over the next several years is a positive one. Earnings at Delta Air Lines, Inc. (NYSE:DAL) are expected to rise from $1.19 per share for 2012 to $2.72 per share for 2014. Similar trends are expected at United Continental Holdings Inc (NYSE:UAL), as the airline expects to finish with merger related costs that caused a loss of $2.18 for 2012 and analysts are expecting earnings of $4.87 per share for 2014.

US Airways Group Inc (NYSE:LCC) may be riding a legacy carrier trend wave since, although analysts do expect earnings to increase, merger costs pertaining to the American Airlines integration are likely to throw these estimates significantly off in one direction or the other. We can also see that Republic Airways Holdings Inc.(NASDAQ:RJET) is trading above its book value, albeit by  a small amount, despite estimates calling for earnings to increase from $1.02 for 2012 to $1.77 for 2014.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!