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Delta Hedges Fuel and Returns Capital

David Becker
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Delta’s (NYSE:DAL) earnings were very solid during the 4th quarter, considering their additional revenues from various other businesses they own. Delta’s cargo transportation business alone brought in over $1 billion in revenue. With the company promising to return $1 billion to shareholders through dividends and a $500 million share buyback program, the stock should continue to benefit. Delta Air Lines hedge their fuel cost with the purchase their own refinery to control volatile fuel costs. This smart idea is estimated to reduce its annual fuel expense by over $300 million dollars.

Delta has insulated itself from increasing fuel costs as the company purchased an oil refinery in 2012 which supplies all of the fuel its aircrafts need.

Delta’s stock price renewed its upward momentum after surging in 2013 and early 2014. Support is seen near the 50-day moving average at $29.63, while resistance is seen near the recent highs at $33.00. Momentum is strong as the MACD (moving average convergence divergence) index is poised to generate a buy signal, as the spread is just about to cross above the 9-day moving average of the spread. The RSI (relative strength index) which is an oscillator that measures over bought and oversold levels is printing near 56, which is in the middle of the neutral range.

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