Delta Air Lines, Inc. (DAL): Is Its Refinery Missing Expectations?

Doomed?
With Delta Air Lines, Inc. (NYSE:DAL) as a whole producing record profit, it is easier to downplay the continual disappointments of the refinery segment. Moreover, Hurricane Sandy was a once in a generation event that had a lasting impact on the refinery’s operations. A large part of the Trainer refinery’s underperformance can be attributed to this “exogenous” event. The refinery’s profitability will also improve as Delta follows the example set by Phillips 66 (NYSE:PSX) and others by sourcing cheaper crude oil from North Dakota’s Bakken formation and transporting it by rail to the East Coast.

Nevertheless, investors should keep an eye on the Trainer refinery’s profitability through the rest of 2013. While Delta’s initial investment in the refinery was relatively minimal at $300 million, the recent operating losses have driven up the effective cost. If the refinery continues to be a drag on earnings, it could offset Delta Air Lines, Inc. (NYSE:DAL)’s relatively strong performance in the core airline business, and hurt its stock.

The article Is Delta’s Refinery Missing Expectations? originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Motley Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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