Southwest Airlines Company (LUV), based in Dallas, Texas, is a passenger airline that provides scheduled air transportation services in the United States and closest international markets. The company is valued at $16.83 billion by market cap and offers short-haul, high-frequency, point-to-point, and low-fare services. Incorporated in 1967 and taking flight in 1971, it is the world's largest operator of the Boeing fleet.
Shares of this largest domestic airline in terms of originating passengers, with a 22% market share, have underperformed the broader market considerably over the past year. LUV has declined 4.4% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 28.3%. In 2024 alone, shares of LUV are down 3.8%, while the SPX is up 11.3% on a YTD basis.
Narrowing the focus, LUV’s underperformance is also apparent compared to the Transportation Average iShares ETF (IYT). The exchange-traded fund has gained about 18.5% over the past year. Moreover, the ETF’s 1.6% gains on a YTD basis compare to the stock’s loss over the same time frame.
LUV’s shares declined 14.8% in March as the company said it would reevaluate all prior 2024 financial guidance, including the expectation for capital spending, due to Boeing’s delivery delays this year. Boeing is the airliner's sole aircraft supplier, and the plane maker informed LUV that it could deliver 46 out of the 58 737 Max 8 planes this year. The stock’s decline in March could also be attributed to its weak first-quarter guidance.
For the current fiscal year, ending in December, analysts expect LUV to report an EPS decline of 33.1% to $1.05 on a diluted basis. The company’s earnings surprise history is mixed. It beat or matched the consensus estimate in three of the last four quarters while missing the forecast on another occasion.
Among the 20 analysts covering LUV stock, the consensus rating is a “Hold.” That’s based on six “Strong Buy” ratings, one “Moderate Buy,” nine “Holds,” one “Moderate Sell,” and three “Strong Sells.”
This configuration is slightly more bullish than three months ago, with three suggesting a “Strong Buy” and four suggesting a “Strong Sell.”
Recently, HSBC initiated coverage of LUV stock, assigning a “Hold” rating with a price target of $27.80, implying a marginal upside from current levels.
The mean price target of $28.71 represents a 3.4% premium to LUV’s current price levels. The Street-high price target of $40 suggests an ambitious upside potential of 44%.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
