LUV shares gained altitude Monday following reports over the weekend that activist investor Elliott Investment Management has a nearly a $2 billion stake and has made turnaround plans for the struggling Southwest Airlines.
The move, reported Sunday by the Wall Street Journal reported Sunday, makes Elliott one of Southwest Airlines' largest shareholders. The firm intends to engage with Southwest's management team, according to the WSJ, citing unnamed sources. The firm is seeking to replace Southwest CEO Bob Jordan and chair Gary Kelly and believes that Southwest has fallen from a "best-in-class" airline to one of the biggest stragglers, CNBC reported separately Monday citing an investor presentation.
Elliott said it conducted an 18-month research period and spoke with numerous former Southwest employees. The investor also spoke with shareholders and surveyed more than 2,000 customers to understand why consumers preferred Southwest, according to the presentation.
Southwest Airlines stock was hammered in mid-March after the company said that Boeing delivery delays forced it to reevaluate "all prior full year 2024 guidance, including the expectation for capital spending."
Meanwhile, airline missed Q1 estimates on April 25 and lowered its revenue guidance based on "significant challenges" from Boeing's aircraft delivery delays. Southwest forecasts operating revenue growth in the high single digits. It previously expected double-digit year-over-year operating revenue growth for 2024.
For the year, FactSet expects earnings to fall 30.6% to $1.09 per share. Analysts predict 2024 sales increase of 7% to $27.94 billion.
Southwest Airlines Stock
LUV stock jumped 7% Monday on the report. Southwest Airlines stock rebounded strongly above its 50-day moving average on the move. Shares have been in decline for more than 40 months.
Meanwhile, other airline stocks were little-changed Monday morning.
Delta Air Lines ticked up a fraction. DAL stock is trading in a buy zone for a cup-with-handle base, trading near its 50-day line.
UAL stock edged slightly higher. United Airlines is working on a 56.17 buy point for a cup-with-handle base.
American Airlines inched down as AAL stock continues to trade near 2024 lows.
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