Update: Southwest Airlines Beats Earnings Through Lower Fuel Costs
- Revenue rose to $4.63 billion from $4.43 billion a year ago.
- EPS rose to $0.59/share, excluding special items, from $0.33/share a year ago.
- Fuel costs fell over 14% to $2.62 per gallon, inclusive of hedges.
Update: Aggressive Accounting Leads To Southwest Soaring On EPS Beat
- The company delivered strong fourth quarter performance when excluding special items.
- EPS excluding special items and EPS on a GAAP basis materially increased by a gain that I believe was transitory.
- The change in estimates inflated revenue resulting in better margins and higher EPS.
- I predicted strong performance for Southwest, but I'm pulling my bullish thesis.
- Southwest Airlines was one of the top performing stocks of 2014.
- With strong financials and a favorable economic climate, the company should be able to continue growing in 2015.
- A capable and shareholder-friendly management team makes this company a good long-term buy and hold.
- Southwest Airlines hopes that it will be able to hedge roughly 20% of its fuel requirement this quarter.
- Oil prices are expected to begin to rise in the latter half of 2015 which would deem the company better off than its peers given the employment of its hedging.
- The company’s discount deals, travel packages and “bags fly free” program enable consumers to cut their traveling expenses.
- Early in the previous month, Southwest launched two international flights with its own brand and also completed the integration of bookings and frequent flyer functions into its website.
- Southwest’s acquisition of AirTran has generated considerable positive synergies for Southwest which can be glimpsed in the company’s impressive financial performances after the acquisition.
- The deal has given Southwest access to a total of 37 new locations, 9 of which are outside the U.S.
- The acquisition of AirTran has allowed Southwest’s customers access to low cost international travel to locations such as Mexico, South America and popular holiday destination, the Caribbean.
- Southwest presents a highly attractive investment prospect with considerable gains to be made. Both long term and short term investors will benefit.
Look For Shares Of Southwest Airlines To Continue To Gain Altitude
- Southwest Airlines has rewarded investors significantly over the past year, gaining more than 120% during this time.
- Southwest has a conservative balance sheet relative to its competitors and has been aggressively reducing its debt level in recent years.
- Analysts project that the firm's earnings per share will grow at an annual clip of approximately 25% more going forward thanks to an improving U.S. economy and lower oil prices.
- Based on these impressive growth projections, the DRAG model predicts Southwest's share price could continue to gain altitude over the coming year.
Southwest Airlines Undervalued On Low Oil Prices, Acquisition Synergies, Expansion Opportunities
- An efficient business model improves operating margins and profitability.
- Big growth opportunities exist with international expansion, US economic growth, and AirTran acquisition synergies.
- A strong Q3 earnings report demonstrates the financial strength and growth strategies of LUV.
- Airlines used to be a pariah sector. Too much debt weighed down the airlines.
- Bankruptcies and mergers have put them all in better shape.
- I can't believe I'm actually suggesting that airline stocks are a BUY.
- There aren't any bad choices, but two stand out above the rest.
FAA Sues Southwest Airlines Over Maintenance Violations: No Reason To Change Valuations
- The FAA has filed a lawsuit against Southwest Airlines for improper aircraft repairs made by a contractor in Washington State between 2006 and 2009.
- All of the aircraft involved in the litigation have already been repaired and returned to service. The FAA action should have no bearing on future revenue.
- The FAA proposed fine is only $12M. That is pocket change for an airline that generated $17.7B in revenue and $754M in net profit last year.
- Passengers are unlikely to be concerned with the issue. Neither the FAA action nor the original aircraft issues are news at this point. The only news here is the litigation.
Update: Southwest Airlines Company Q3 2014 Earnings
- LUV beats analyst estimates on EPS and by $.02 and revenue by $10 million.
- Excluding special items EPS was up by about 62% year over year.
- The revenue and EPS beat supports my opinion about LUV being the best company in the industry.
- Strong performance was predicted in my original article.
- Jet fuel is an important expense in any airline's financial statement. Southwest’s hedging team is an industry best.
- Southwest is expanding its continental US flights and implementing International flights with the acquisition of AirTran Airways.
- Southwest will begin implementing baggage fees, a move that would increase revenue.
Southwest Airlines Is Perfectly Set Up For A Long Flight
- Airlines are in a good position to benefit from the recent drop in oil prices.
- The decline in the overall market provides an excellent point of entry.
- Good balance sheets and expanding territory give Southwest the edge for growth.
- By following a simple strategy to be the low-cost airline, Southwest has been able to reliably produce profits when other airlines have hemorrhaged money.
- Southwest Airlines has by far the cleanest balance sheet in the industry.
- Free cash flow and net income are both rapidly improving over 2013.
- Southwest, Delta, American Airlines and United Continental Holdings have all increased in price.
- The operational performance for Southwest has been the best, but Delta is close.
- American Airlines and United Continental Holdings have had to choose between sales growth and positive operating margins.
- Although LUV's stock has already surged 80% year-to-date, it still has room to move higher.
- LUV's PEG ratio is exceptionally low at 0.53, the seventh lowest among all S&P 500 stocks.
- Southwest Airlines has been able to show earnings per share surprise in each one of the last three-quarters, and the company demonstrated significant improvement in its profitability.
Southwest Airlines: International Expansion To Fuel Growth
- Southwest began offering international flights this summer which provides a new avenue for sales growth.
- Over the last few quarters, Southwest has surpassed its internal goal of pre-tax return on invested capital of 15%.
- Southwest has maintained fares that are on average over 25% lower than its three largest competitors on a per mile basis.
Is It Time For Southwest Airlines To Charge For Luggage?
- After years of trying not to upset customers, it is finally time for Southwest Airlines to take baggage revenue more seriously. Other low-cost carriers have been ahead for years.
- Southwest is slowly adding international destinations, and rumors suggest Canada is next. Other international carriers have substantial baggage restrictions and fees.
- Flying extra luggage actually costs airlines money in fuel, handling, and occasional damage claims; why shouldn’t revenue be aligned with expenses?
Southwest Airlines: A Top Performing Equity, Demonstrating Growth Since 1967
- LUV's history and successful growth.
- 2011 M&A with AirTran and tailwinds from standardized inventory management.
- Crisis management, successful YOY financials, and current status/expansion.
Thu, Jan. 22, 9:31 AM
- Airline stocks are set to rally as news from the sector continues to be favorable.
- Double-digit fuel cost declines. Check.
- Fares holding. Check.
- Passenger revenue miles outpacing capacity gains. Check.
- Analyst ratings and EPS upgrades. Check.
- Related stocks: LUV, UAL, DAL, AAL, JBLU, ALK, HA, SAVE, ALGT, RJET, VA.
Thu, Jan. 22, 9:08 AM
- Southwest Airlines (NYSE:LUV) reports passenger revenue rose 2.6% on a unit basis to 44.4B in Q4.
- The company's load factor improved 160 bps Y/Y to 82.0% as revenue passenger miles outpaced capacity gains.
- Average stage length +2.6% to 722 miles.
- Average airfare +1.3% to $158.06.
- Freight revenue +12.2% to $46M.
- Economic fuel costs fell 14.1% Y/Y to $2.62 per gallon inclusive of settled hedges.
- LUV +4.61% premarket to $43.76.
Thu, Jan. 22, 8:32 AM| 1 Comment
Mon, Jan. 12, 9:15 AM
Dec. 31, 2014, 10:07 AM
- Airline stocks are in rally mode again off of momentum driven by the latest slide in oil prices.
- Southwest Airlines (LUV +2.2%) is poised to end the year as the top performing stock of the S&P 500 Index with a +125% rip.
- Though jet fuel hedging strategies vary widely throughout the sector, a prolonged period of lower oil prices will allow all carriers to realize a benefit.
- Gainers: Republic Airways (NASDAQ:RJET) +4.4%, United Continental (NYSE:UAL) +2.4%, Virgin America (NASDAQ:VA) +1.9%, JetBlue (NASDAQ:JBLU) +1.8%, Alaska Air Group (NYSE:ALK) +1.7%, Allegiant Travel (NASDAQ:ALGT) +1.6%, Delta Air Lines (NYSE:DAL) +1.6%, SkyWest (NASDAQ:SKYW) +1.4%.
- Previous: Hedging strategies by airline
Dec. 10, 2014, 9:49 AM
- Airline stocks rip a fresh set of gains after oil prices weaken again and the IATA issues a rosy forecast on 2015 profit for the sector.
- There has also been a wave of analyst upgrades on airliners which has boosted sentiment.
- Leading gainers: Southwest Airlines (NYSE:LUV) +3.1%, United Continental (NYSE:UAL) +3.1%, Spirit Airlines (NASDAQ:SAVE) +2.7%, American Airlines Group (NASDAQ:AAL) +2.6%, China Eastern Air (NYSE:CEA) +2.4%, Republic Airways (NASDAQ:RJET) +2.4%, Virgin America (NASDAQ:VA) +2.0%, China Southern Airlines (NYSE:ZNH) +1.9%.
Dec. 8, 2014, 9:07 AM| 3 Comments
Dec. 8, 2014, 7:51 AM
- Southwest Airlines (NYSE:LUV) is upgraded by Goldman Sachs to a Buy rating from Neutral.
- The investment firm raises its price target by 25% to $55.
- Related: Airliners on watch for more gains with oil sliding
- LUV +1.2% premarket.
Dec. 4, 2014, 10:02 AM
- Another big day for airline stocks is setting up with oil prices losing their footing again.
- A positive note from JPMorgan on sector capacity trends is also helping to boost sentiment.
- Gainers: Delta Air Lines (NYSE:DAL) +2.8%, American Airlines Group (NASDAQ:AAL) +3.2%, Hawaiian Holdings (NASDAQ:HA) +6.5%, United Continental (NYSE:UAL) +5.4%, Alaska Air Group (NYSE:ALK) +2.9%, JetBlue (NASDAQ:JBLU) +2.9%, Southwest Airlines (NYSE:LUV) +2.2%, Spirit Airlines (NASDAQ:SAVE) +1.7%, Republix Airways (NASDAQ:RJET) +0.8%, Virgin America (NASDAQ:VA) +1.6%.
Nov. 6, 2014, 2:32 PM
- Airline stocks are on the move as lower oil prices and a continued tapering of Ebola fears boost prospects for demand.
- Capacity control has been a focus in the sector. So far, guidance from key companies this earnings season and presentations ongoing at the Raymond James Global Airline/Transportation Conference in NYC indicate U.S. carriers are keeping a nice grip on capacity.
- Advancers: JetBlue (NASDAQ:JBLU) +5.2%, Southwest Airlines (NYSE:LUV) +3.5%, Delta Air Lines (NYSE:DAL) +3.3%, United Continental (NYSE:UAL) +3.1%, Spirit Airlines (NASDAQ:SAVE) +2.9%, American Airlines Group (NASDAQ:AAL) +2.9%, Alaska Air Group (NYSE:ALK) +2.9%.
Oct. 23, 2014, 8:06 AM| 1 Comment
Oct. 21, 2014, 1:12 PM
- Airline stocks are putting in another volatile day as the Ebola headlines veer toward the positive side.
- Gainers: Spirit Airlines (NASDAQ:SAVE) +5.0%, American Airlines Group (NASDAQ:AAL) +5.3%, Southwest Airlines (NYSE:LUV) +4.7%, SkyWest (NASDAQ:SKYW) +4.1%, United Continental (NYSE:UAL) +2.9%, Delta Air Lines (NYSE:DAL) +2.5%, Allegiant Travel (NASDAQ:ALGT) +1.9%, JetBlue (NASDAQ:JBLU) +2.3%, Alaska Air Group (NYSE:ALK) +1.9%.
Oct. 3, 2014, 10:21 AM
- Airline stocks are in rally mode with gains up and down the sector.
- A strong note from Deutsche Bank on JetBlue is helping to swing sentiment. The investment firm added JBLU to its short-term buy list.
- The group is also benefiting from renewed confidence that the Ebola case in Texas is isolated.
- Oil prices are also cooperating nicely.
- Gainers: Southwest Airlines (NYSE:LUV) +2.2%, United Continental (NYSE:UAL) +5.5%, Delta Air Lines (NYSE:DAL) +4.6%, Alaska Air Group (NYSE:ALK) +3.0%, Hawaiian Holdings (NASDAQ:HA) +3.1%, American Airlines Group (NASDAQ:AAL) +5.3%, Republic Airways (NASDAQ:RJET) +3.0%.
Oct. 2, 2014, 8:20 AM
- Airline stocks move higher in early trading after suffering a painful drop yesterday.
- The sector was grounded from fears stirred up by the Ebola case in Dallas.
- The CDC issued a statement later yesterday on its website indicating that newer airplanes have a cabin environment that is not conducive to the spread of most infectious diseases.
- Gainers: Delta Air Lines (NYSE:DAL) +1.3%, United Continental (NYSE:UAL) +1.2%, American Airlines Group (NASDAQ:AAL) +0.8%, Southwest Airlines (NYSE:LUV) +0.8%.
Oct. 1, 2014, 8:19 AM
- Airline stocks are tilting lower after yesterday's report on the first case of Ebola in the U.S.
- Premarket: JetBlue (NASDAQ:JBLU) -2.2%, American Airlines Group (NASDAQ:AAL) -1.8%, United Continental (NYSE:UAL) -1.6%, Delta Air Lines (NYSE:DAL) -1.9%, Southwest Airlines (NYSE:LUV) -1.5%., Alaska Air Group (NYSE:ALK) -1.3%, Spirit Airlines (NASDAQ:SAVE) -1.4%.
Aug. 18, 2014, 10:16 AM
- Airline stocks start the week with an upward swing after crude-oil futures drop. Several analysts are out with a forecast for the lower oil prices sustaining for the short-term.
- Advancers: Delta Air Lines (NYSE:DAL) +2.6%, American Airlines Group (NASDAQ:AAL) +3.3%, United Continental (NYSE:UAL) +3.5%, Southwest Airlines (NYSE:LUV) +2.3%, JetBlue (NASDAQ:JBLU) +2.0%.
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