EPS is a whole other issue, and one that has nothing to do with the absolute market cap. It has to do with the number of shares outstanding for each company and the accounting earnings for the quarter or year. Companies with the exact same earnings (in $) usually have wildly different EPS numbers due to differences in shares outstanding. EPS is an important indicator of stock performance, but only relative to the same company's previous EPS (i.e. is the company growing earnings or not).

The (mistaken) statement that Delta does not deserve a 3x market cap vs. CAL certainly does not have any implication whatsoever for the earnings per share figures relative to one another, so not sure how we jumped to this point.

Again, what makes the most sense here is to look at relative value multiples and ask whether Delta really should trade at a premium or discount to CAL on a forward P/E or EV/EBITDA basis (that EV is enterprise value, by the way).

Well, the way the market place keeps track of earnings is on a per share basis. But, yes, the ultimate market cap will be PRIMARILY determined by total earnings. Unless Delta has 3 times Continental's total earnings -- an impossibility in my mind -- look for the market cap of the two stocks to converge. No one will care much about "enterprise value."

This is a completely confused statement for the reasons I and others list above. Two firms with the same asset base can have wildly divergent market caps if one company has significant claims on its assets by debtholders. Yes, in the airline industry -- especially -- people very much care about debt, collateral, etc. and the implications of all of this on the value of common stock. Delta is a bigger airline, will emerge with very little debt, ergo ...

Anyway, I've tried. Happy to discuss further offline.

Delta's new stock is currently trading on a "when issued" basis at $19.43/sh, giving a market cap of $7.8 billion, nowhere near the hyped-up nonsense of $9 billion to $14 billion that Delta was pushing:

http://www.marketwatch.com/tools/quo...WI&sid=2690057

Its market cap right now is just a little more than AMR's.

Well, to each his own. I will say that in a decade of trading these things, I have never seen anyone make a dollar by scrutinizing the relative debt levels of airlines if, as I noted earlier, it was even plausible to do so (except, of course, when questions arise regarding the ability to service that debt, and bankruptcy becomes a possibility, or reality). It's earnings, baby. Or, more accurately, earnings momentum (for instance, earnings right now are pretty darn good, but investors are skittish because they fear a downward trend).

I would also note that your assessment that Delta will now have "very little debt" is erroneous.

Logic would suggest it will trade down to the $5 billion range, and lower if it forecast better-than-other-legacy-carrier earnings don't materialize.

The problem with a $7.8 billion market cap is there's no upside for shareholders. If everything went well, they'd get to keep their money. If it doesn't go swimmingly, they lose money. It's is very hard to envision a world where, in the immediate future, Delta would be worth more than $8 billion. If such a world materialized, logic would also suggest that shareholders of other lower-valued airlines, like CAL, would reaper much greater returns.

I'm more confused then ever. On April 30 3 different quotes (msn, yahoo, aol) showed DAL* with a market cap of 9 billion next day May 1, 7 billion now 3.73 billion. It has been steady around there for a while. The stock price itself has not moved much since the opening. What is going on. Did Delta dupe its shareholders by not selling to US Air. What happened to all those quotes from their CEO about Delta emerging from bankruptcy with a "Market Cap betweeen 9-14 billion"

I don't know what the financial websites are showing, but remember that there is rarely a thoughtful human behind such data. Kinda like "garbage in, garbage out."

My understanding is that there are 400 million DAL shares to be issued (some already issued, some tied up by litigation) which at today's closing price would mean DAL's market cap is $7.6 billion.

To my surprise, there were shares easily available to short last week and it has so far proven to be a profitable bet. I still think there is plenty more downside there as, realistically, the market cap has to decline another $2 or $3 billion to be remotely comparable to the other legacy carriers.

http://finance.yahoo.com/q/co?s=CAL

http://finance.yahoo.com/q?s=dal



DIRECT COMPETITOR COMPARISON

CAL AMR LUV UAUA Industry
Market Cap: 3.62B 6.26B 11.21B 3.79B 3.91B
Employ.ees: 43,770 86,600 32,664 55,000 49.96K
Qtrly Rev Growth (yoy): 7.90% 1.60% 8.90% -2.10% 8.90%
Revenue (ttm): 13.36B 22.65B 9.27B 19.25B 17.60B
Gross Margin (ttm): 22.21% 28.13% 62.99% 15.06% 28.13%
EBITDA (ttm): 1.10B 2.57B 1.36B 1.53B 1.53B
Oper Margins (ttm): 4.23% 5.27% 8.28% 2.43% 4.38%
Net Income (ttm): 431.00M 404.00M 531.00M 86.00M 305.00M
EPS (ttm): 3.901 1.500 0.652 0.738 1.83
P/E (ttm): 9.56 17.35 22.02 45.58 15.38
PEG (5 yr expected): 0.49 0.40 1.60 1.18 0.95
P/S (ttm): 0.27 0.28 1.21 0.20 0.28


AMR = AMR Corporation
LUV = Southwest Airlines Co.
UAUA = UAL Corporation
Industry = Major Airlines



AIRLINES RANKED BY REVENUE PASSENGER MILES


Company Symbol Price Change Market Cap P/E
AMR Corporation AMR 26.02 -0.19% 6.26B 17.35
UAL Corporation UAUA 33.64 -0.38% 3.79B 45.58
Air France KLM AKH 49.47 0.47% 13.33B 12.28
Delta Air Lines Inc. DAL 18.67 -1.16% 3.68B N/A
Northwest Airlines Corp. NWACQ.PK 0.061 -56.43% 5.33M N/A
British Airways plc BAB 98.23 1.70% 11.30B 11.42
DLAKY.PK 29.25 0.00% N/A N/A
Japan Airlines Corporation Private - View Profile
Southwest Airlines Co. LUV 14.36 0.07% 11.21B 22.02
Continental Airlines, Inc. CAL 37.28 -0.03% 3.62B 9.56

You are correct. Yahoo! Finance has been using the same number of shares outstanding from before the old stock was canceled (197 million or so) instead of the actual number of NEW DL shares outstanding of about 400 million.

Woe to anyone who relies upon such data. :)

You're right, too -- I just looked at Yahoo Finance and they show DAL with a $3.6 billion market cap. Embarrassing and pathetic.

I would expect the next few weeks to be rough for investors, given the gas price situation. The airline industry is going to be looking at its options for cutting costs now with prices hovering at $3.10 a gallon (avg. across the nation).

I don't know, the last few weeks have been terrible for airline stocks, even though the overall market has been good. Airlines don't put gasoline in their planes, they put JetA -- and, unlike gas, that's not sky high (just the usual high prices of the past few years). There's been some talk of slowing demand but some airlines -- like CAL -- see nothing of the sort.

I like to buy airline stocks cheaper than CAL is right now, but I must say I think it probably undervalued here. You need a catalyst, though -- an "all clear," if you will. I don't see one yet.

I understand that they don't put gasoline in the planes (I work in the oil industry ;)) and I should have stated "with the price of a barrel of oil hovering at $63" then added my point.

Daily quotes for jet fuel take more research than I'm willing to invest, but home heating oil prices tend to closely mimic the price of jetA, and heating oil closed today at $1.89/gal:

http://biz.yahoo.com/ap/070515/oil_prices.html?.v=10

No matter how it's expressed, petroleum is way up from its January dip in price. :)