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- 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.
- 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.
Does The International Growth Of Southwest Airlines Make It A Buy?
- Southwest Airlines is now expanding into select international locations.
- Fees at Southwest remain low, but a recent study showed their fares are rising in some areas.
- Southwest has strong brand loyalty, but is it enough?
Southwest Airlines: Still LUVing It As An Investor
- Southwest plans to extend in to international routes give the company considerable operational leverage.
- The new post Wright Amendment playing field give the company a significant domestic operation booster.
- Capacity expansion into the growing economy provides high leverage in terms of profitability.
Mon, Dec. 15, 3:14 PM
- Senator Charles Schumer calls on the DOT to probe the airline industry for the high level of airfares despite the drop in jet fuel costs and booming airliner profits.
- By most tabulations, airfares have held steady over the last few weeks.
- Previously: IATA: Profits to rise 26% for airliners in 2015 (Dec. 10 2014)
- U.S. carriers: LUV, UAL, DAL, AAL, JBLU, ALK, HA, SAVE, ALGT, RJET, VA.
Wed, Dec. 10, 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%.
Wed, Dec. 10, 8:36 AM
- IATA forecasts airline profits will rise 10.6% Y/Y to $19.9B this year.
- The outlook from the research firm for 2015 is for 25.6% jump in profit to $25B.
- Consumers can expect to see a 5.1% decline in airfares next year, while cargo shippers should pay 5.8% less.
- On a per-passenger basis, IATA thinks the the airline industry will show a net profit of $7.08 in 2015 vs. $6.02 in 2014 and $3.38 in 2013.
- The profit gains are tied to lower oil prices and improved GDP numbers across key sections of the globe.
- Airline stocks: AAL, UAL, DAL, RYAAY, OTCPK:CPCAY, OTCPK:SINGY, CEA, ZNH, CPA, GOL, LFL, OTCPK:DLAKF, AIDIF, OTCPK:QUBSF, JBLU,ALK, HA, OTCPK:AIRYY, OTCPK:MLYAF, OTCQX:AFLYY, VLRS, LUV, RJET, SAVE, ALGT, VA.
Mon, Dec. 8, 9:07 AM| 3 Comments
Mon, Dec. 8, 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.
Mon, Dec. 8, 7:32 AM| 7 Comments
Thu, Dec. 4, 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%.
Sat, Nov. 29, 10:29 AM
- Analysts with Gasbuddy.com predict some gas stations in the U.S. will offer $2 per gallon gas by Christmas.
- The last time the average price of gas in the U.S. was below $2 was in March of 2009.
- Forecasts from economists vary widely on the overall gas benefit to consumers for Q4. The high end from the group is an outlook of $300 per household, while the low end is closer to $100.
- Most analysts see an immediate lift for retail chains with large distribution channels. Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Costco (NASDAQ:COST), Dollar General (NYSE:DG), Family Dollar (NYSE:FDO), Dollar Tree (NASDAQ:DLTR), Big Lots (NYSE:BIG), and Five Below (NASDAQ:FIVE) come to mind.
- Airline stocks (JBLU, DAL, UAL, LUV, AAL, RJET, ALK, HA, ALGT, VA) have already ripped strong gains off the OPEC news, although some see even more long-term upside as forward fuel hedges get reworked.
- A sustained period of low gas prices should lift restaurant stocks (CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN) say some analysts.
- The gaming sector is (CZR, PNK, BYD, ISLE, CNTY, MCRI, MGM, NYNY) also an off-the-radar pick to bounce.
Fri, Nov. 28, 8:13 AM
- The OPEC decision to hold oil production levels steady has put a charge into airline stocks in early trading off the prospect for sustained lower jet fuel costs.
- Delta Air Lines (NYSE:DAL) is up 4.1% premarket and United Continental (NYSE:UAL) has already rallied 3.5%. The rest of the group is expected to fall suit.
- Airline stocks on watch: JBLU, AAL, LUV, ALGT, SAVE, HA, ALK, SKYW, VA.
Thu, Nov. 20, 1:29 PM
Thu, Nov. 20, 9:12 AM
- Air fares rose 2.2% M/M in October, according to the underlying data from the Bureau of Labor Statistics. The development arrives just as jet fuel prices are moderating on forward contracts for carriers (LUV, JBLU, HA, ALK, ALGT, SAVE, AAL, DAL, UAL, RJET).
- Breakfast cereal prices rose 1.5% M/M in October. Though the gain could be due to a soft promotions-influenced comp from a year ago, sellers (GIS, K, POST) won't mind the relief.
- Another surprise might be the +4.3% average price rise in the women's dresses category. Ann (NYSE:ANN), L Brands (NYSE:LB), Cache (NASDAQ:CACH), Cato (NYSE:CATO), Chico's FAS (NYSE:CHS), and Ascena Retail (NASDAQ:ASNA) could be part of that improvement.
- BLS CPI table
Wed, Nov. 19, 9:30 AM
- JetBlue (NASDAQ:JBLU) discloses in a SEC filing that it will add baggage fees as a mechanism to improve profitability.
- The development will leave Southwest Airlines (NYSE:LUV) as the only U.S. major carrier to allow at least one bag to fly for free.
- The company also noted that the number of seats on its Airbus A320 planes will go to 165 from 150, presumably by cutting out some premium seating or reducing legroom across coach.
- JetBlue plans to offer three branded fare bundle options to customers sometime in the first half of 2015.
- SEC Form 8-K
Wed, Nov. 19, 7:54 AM| Comment!
Tue, Nov. 11, 5:46 AM
- Southwest Airlines (NYSE:LUV) expects to raise its capacity 6% next year, says CFO Tammy Romo, with growth mostly coming from adding more seats and flying longer distances.
- Falling fuel prices are also giving the carrier a boost, in addition to the new efficient Boeing 737s in its fleet.
- Romo says Southwest plans to announce a $200M accelerated stock repurchase program in the coming days.
Thu, Nov. 6, 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%.
Wed, Nov. 5, 12:06 PM
- U.S. airliners aren't losing their grip on capacity control in the face of falling oil prices, say Imperial Capital analysts covering the sector.
- They note American Airlines reduced capacity in both January and February by 4% which should have a carry-over effect on pricing in many markets.
- "We expect legacy peers to by and large follow American’s lead in maintaining or even decreasing capacity despite more favorable fuel prices," writes IC.
- Regional carriers: LUV, UAL, DAL, AAL, JBLU, ALK, HA, SAVE, ALGT, RJET.
LUV vs. ETF Alternatives
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