Delta 4Q10 Falls Short of Hudson Estimates

Hudson Securities is out with its report on Delta Air Lines DAL after announcing disappointing Q4 results. In a note to clients, Hudson writes, "Excl 1x items, DAL reported 4Q10 revenues of $7.8B, an operating profit of $402M (5.2% margin), and a net profit of $158M or $0.19/share, falling short of consensus $0.24 and HS $0.22. Vs our model, DAL's pretax income was $25M short primarily on revenues.Our $20 PT is based on DAL's enterprise value trading at 5x our unchanged 2011E EBITDAR. Selloff of the shares was understandable given a disappointing 4Q and lackluster 1Q guidance, but overdone. Revenue upside in 2Q is likely limited given competitive capacity, but that is already factored into our EPS outlook. And with DAL's EV now trading at 3.8x our 2011 EBITDAR, the stock is trading at a 21% discount to peers despite its stronger competitive position. Moreover, we see upside to our 2011 EPS from a slot swap. Hence our view that shares are oversold; maintaining a Buy." DAL is trading pre-market at $11.85, up 1.26% from yesterday's close.