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Executive Summary - No Passive Voice

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Submitted By brja9989
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Executive Summary: Financial Analysis

Nominal Performance:

An investment in Delta shares five years ago yielded a 26.44% annual return, significantly more than the 10.17% the S&P 500 returned annually over that same period.

Delta’s stock price moved with the industry 2011
2012
2013
2014
2015 average over the past five years, varying at most by a 7.02% difference in price. American Airline Group Inc. stocks are trading at the highest price because the company elected not to use fuel hedging and as a result benefited financially from the drop of oil prices in mid 2014.

Absolute Performance:

Delta shares outperformed the market, with a geometric annual return of 18.62% while the S&P 500 returned 5.67% on an annualized basis. Average arithmetic returns show that Delta is the second best among the largest competitors, by earning 29.77% on an annual basis, still less than the 39.93% return of Alaska Air.

Financial Ratio:

When compared to other major competitors over the past five years, Delta Air Lines’ 11.12% average ROE is far from the industry’s average of 24.91%. In 2014 Delta’s ROIC of 6.08% was second highest in the industry, following Southwest’s ROIC of 21.22%. In the past five years, Delta used its assets more efficiently by using them to generate 2.91% more net income than the industry. However, the company struggled to maintain a return on equity that is above the industry average of 24.91%. This is due to the fact that Delta reported negative total equity in 2011 and 2012, causing a negative return on equity during those years.

DuPont'Analysis'
Delta'Air'Lines
Ratios
Return'on'Assets
Return'on'Equity'
Airline'Industry'
Ratios'
Return'on'Assets
Return'on'Equity

2010
1.37%
66.11%

2011
1.96%
0.00%

2012
2.26%
0.00%

2013
20.17%
90.53%

2014
1.22%
7.48%

5Y'Average
5.40%
11.12%

2010
0.88%
9.71%

2011
1.13%
29.16%

2012
0.27%
11.08%

2013
8.21%
57.37%

2014
1.98%
17.24%

5Y'Average
2.49%
24.91%

Growth Analysis: Delta experienced consistent revenue growth over the past ten years, growing only 4.43% over the time period. Among three major competitors, Delta was the worst performer in terms of revenue growth over a five-­‐‑year period as well as the second worst performer in terms of earnings per share growth over the same period. Net income growth year-­‐‑over-­‐‑year is -­‐‑93.75%, in part from higher jet fuel inventory and high-­‐‑deferred income taxes, versus Southwest who saw net income grow 50.66%.

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