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Southwest Airlines Co. (LUV), headquartered in Dallas, Texas, is a passenger airline that provides scheduled air transportation services in the United States and closest international markets. Valued at $16.95 billion by market cap, the company offers short-haul, high-frequency, point-to-point, and low-fare services. The leading airliner is expected to announce its fiscal second-quarter earnings for 2024 before the market opens on Thursday, Jul. 25.
Ahead of the event, analysts expect LUV to report a profit of $0.51 per share on a diluted basis, down 53.2% from $1.09 per share in the year-ago quarter. The company beat or matched the consensus estimates in three of the last four quarters while missing on one other occasion.
For fiscal 2024, analysts expect LUV to report EPS of $0.82, down 47.8% from $1.57 in fiscal 2023.
LUV stock has underperformed the S&P 500’s ($SPX) 17.6% gains on a YTD basis, with shares down 1.5% during this period. Similarly, it underperformed the S&P 500 Industrial Sector SPDR’s (XLI) 11.9% gains over the same time frame.
LUV’s overall underperformance can be attributed to attempts by activist shareholder Elliott Investment Management to oust CEO Robert Jordan as the airline struggles with poor operational and financial performance. The hedge fund has accused LUV’s management of failing to change according to evolving customer preferences, leading it to lag behind its rivals. Moreover, the airline recently said that its revenue for each seat flown one mile in Q2 would fall by 4% to 4.5% compared to the prior-year quarter, higher than its previous forecasts of 1.5% to 3.5% in April. It expects costs per mile to rise by 6.5% to 7.5% over the prior year due to rising labor costs.
On Apr. 29, LUV shares fell more than 2% after Jefferies downgraded the stock to Underperform from Hold with a price target of $20.
On Apr. 25, LUV shares closed down more than 7% after reporting its Q1 results. Its adjusted loss was $0.36, wider than the consensus estimates of an adjusted loss of $0.31. The company’s revenue of $6.33 billion fell short of Wall Street estimates of $6.45 billion. The airline warned that The Boeing Company’s (BA) airplane delays will hamper its growth into 2025. It expects to receive only 20 Boeing 737 Max 8 planes, down from the previous forecasts of 46.
Analysts’ consensus opinion on LUV stock is neutral, with a “Hold” rating overall. Out of 18 analysts covering the stock, five advise a “Strong Buy” rating, one has a “Moderate Buy” rating, eight recommend a “Hold” rating, one suggests a “Moderate Sell” rating, and three give a “Strong Sell.” The average analyst price target for LUV is $28.99, indicating a 2.4% potential upside from the current levels.
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.
