Earnings Preview: Southwest Set To Report Wednesday

Jan.17.12 | About: Southwest Airlines (LUV)

Southwest Airlines Co. (NYSE:LUV) is scheduled to release last fiscal quarter's results before the opening bell on January 19, 2012.

Southwest operates as a passenger airline that provides scheduled air transportation in the United States. As of December 31, 2010, the company operated 548 Boeing 737 aircraft and provided service to 69 cities in 35 states. The company was founded in 1967 and is headquartered in Dallas, Texas. LUV trades an average of 5.6 million shares per day.

52 Week High: $13.18

52 Week Low: $7.15

Book Value: $8.33

Float Short: 2.98%

On average, 12 analysts are expecting a drop of $-0.09 in earnings per share compared to last quarter's results of $0.15. A beat of $0.06 per share,will top the estimated mean earnings. Analyst estimates range between $-0.01 and $0.11 per share.

The P/E ratio has been under pressure, as the current trailing twelve months (TTM) P/E ratio is 18.1, while the forward P/E ratio is now 11.07. It appears based on the lower PE that investors are pricing in less growth.

There is nothing about this industry that says to do anything other than short if the stock starts to really move. I know of no other industry with overall weaker management teams running the shows. A history of a lack of shareholder wealth building and nothing but tears and sorrow is what you get when you invest in this industry. If you're up after buying you may want to pat yourself on the back and get out while you can.

Revenue year-over-year has increased to $12.10 billion for 2010 vs. $10.35 billion for 2009. The bottom line has rising earnings year-over-year of $459.00 million for 2010 vs. $99.00 million for 2009. The company's earnings before interest and taxes are rising with an EBIT year-over-year of $988.00 million for 2010 vs. $262.00 million for 2009. Rising revenue along with rising earnings is a very good sign and what we want to see with our companies. Be sure to check the margins to make sure that the bottom line is keeping up with the top line.

Here is a look at the fiscal year revenue.

paid2trade.com revenue gross bar chart for LUV Click to enlarge

Gross reported revenue compared to the mean estimate (rounded).

Fiscal Quarter Ending Month-Year Revenue Estimates Actual $ Difference Difference %
Sep-11 $ 4.26 B $ 4.31 B $ 48.12 M 1.13%
Jun-11 $ 4.20 B $ 4.14 B $ -66.76 M -1.59%
Mar-11 $ 3.08 B $ 3.10 B $ 19.16 M 0.62%
Dec-10 $ 3.08 B $ 3.11 B $ 32.59 M 1.06%
Sep-10 $ 3.17 B $ 3.19 B $ 24.73 M 0.78%
Click to enlarge

M = millions, B = billions

Differences are rounded. (Some one-time items are often excluded in reported EPS.)

paid2trade.com Quarterly Estimates And Actual EPS results LUV Click to enlarge

Reported earnings per share compared to the mean estimate. Differences are rounded.

The total short interest number of shares for LUV.

paid2trade.com short interest tool. The total short interest number of shares for LUV Click to enlarge

The number of days to cover short interest based on average daily trading volume for LUV.

paid2trade.com number of days to cover short interest based on average daily trading volume for LUV Click to enlarge

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I use a proprietary blend of technical analysis, financial crowd behavior and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. You may want to use this article as a starting point of your own research with your financial planner. I use Seeking Alpha, Edgar Online and Yahoo Finance for most of my data. I use the "confirmed" symbols from earnings.com that I believe to be of the most interest.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.