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Based in Dallas, Texas, Southwest Airlines Co. (LUV) is a passenger airline company that provides scheduled air transportation services. With a market cap of 14.5 billion, the company specializes in providing short-haul, high-frequency, point-to-point, and low-fare services.
Shares of this airline company have significantly underperformed the broader market over the past 52 weeks. LUV has declined 27.7% over this time frame, while the broader S&P 500 Index ($SPX) has gained 15.1%. In 2024 alone, shares of LUV are down 15.6%, compared to SPX's 9% gain on a YTD basis.
Zooming the focus, LUV has also lagged behind the US Global Jets ETF’s (JETS) 17.7% decline over the past 52 weeks and a 10.7% drop on a YTD basis.
Southwest Airlines shares have underperformed primarily due to delays in Boeing 737 MAX aircraft deliveries and the decision to shut down operations at several airports, which has constrained its network expansion. Also, the airline has struggled with broader industry headwinds, such as high oil prices and elevated interest rates.
However, despite a 51% drop in adjusted net income, the stock soared more than 5% on Jul. 25 due to a strong Q2 earnings report, which featured record revenue of $7.35 billion and exceeded analyst estimates. Additionally, the announcement of various strategic changes, including the abandonment of open seating and the introduction of premium products like extra-legroom seats, further boosted investor confidence.
Nevertheless, for the current fiscal year, ending in December, analysts expect LUV's EPS to decline 77.7% year over year to $0.35. The company's earnings surprise history is mixed. It beat or met the consensus estimates in three of the past four quarters while missing on another occasion.
Among the 18 analysts covering the stock, the consensus rating is a “Hold.” That is based on four “Strong Buy” ratings, one “Moderate Buy,” nine “Holds,” one “Moderate Sell,” and three “Strong Sells.”
This configuration is less bullish than three months ago, with six analysts suggesting a “Strong Buy.”
On Jul. 26, Evercore ISI assigned a “Hold” rating to Southwest Airlines stock, setting a price target of $30, which suggests a modest potential upside of about 23.5% from current levels.
The mean price target of $28.21 represents a premium of nearly 16% to LUV's current levels. The Street-high price target of $40, implies a notable potential upside of 64.5% from the current price level.
On the date of publication, Sohini Mondal 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.
