On Thursday, Southwest Airlines Co. (NYSE:LUV) shares, trading at $34.15 and up over 20% year-to-date, received a reiterated Outperform rating with a steady $36.00 price target from Raymond (NS:RYMD) James. This affirmation comes as Southwest updated its fourth-quarter 2024 guidance in a recent 8-K filing, indicating an optimistic outlook.
According to InvestingPro, six analysts have recently revised their earnings estimates upward for the upcoming period, with analyst targets ranging from $19 to $39. The airline has raised its year-over-year RASM (revenue per available seat mile) forecast from the previously expected range of 3.5-5.5% to a new estimate of 5.5-7.0%.
The upward revision is attributed to a surge in leisure travel demand and quicker benefits from enhancements in booking curve optimization and revenue management strategies.
The airline's positive momentum is further supported by strong forward bookings, which include the holiday travel period in the fourth quarter of 2024. With revenue growth of 7.61% over the last twelve months and a market capitalization of $20.48 billion, Southwest anticipates that the favorable RASM trends will persist into 2025, aligning with the strategic plans discussed during its September investor day.
InvestingPro's comprehensive analysis shows the company maintains a "Fair" overall financial health score, particularly strong in price momentum. Despite the increased RASM outlook, the airline has maintained its projections for ASM (available seat miles) and CASM-Ex (cost per available seat mile excluding fuel and profit sharing). However, it has adjusted its fuel cost guidance from $2.25-2.35 per gallon to a slightly higher range of $2.35-2.45.
Considering the revised guidance, the adjusted earnings per share (EPS) are now expected to fall between $0.26 and $0.52. This range is in contrast to the previously estimated $0.40 by Raymond James and the consensus estimate of $0.36.
In addition to the updated financial guidance, Southwest is advancing with its fleet strategy, which was initially outlined during the investor day. An initial transaction related to this strategy is expected to be finalized by 2025.
In a significant development for shareholders, Southwest has announced plans to initiate an additional $750 million accelerated share repurchase program (ASR) in the first quarter of 2025, while maintaining a dividend yield of 2.11%. This move follows the completion of a $250 million ASR that was previously announced in October.
Investors should note that the company's next earnings report is scheduled for January 23, 2025. For detailed valuation analysis and additional insights, check out the full Southwest Airlines Research Report available on InvestingPro. Once the new ASR program is concluded, Southwest will have $1.5 billion left under its substantial $2.5 billion repurchase authorization, which was disclosed during its investor day.
In other recent news, Southwest Airlines has revised its Q4 revenue outlook upward, with an anticipated increase in revenue per available seat mile (RASM) of 5.5% to 7.0%. This positive outlook is supported by six analysts who recently revised their earnings upwards for the upcoming period. The airline also plans to redeem its $1.3 billion 5.25% Notes due in 2025 and launch an additional $750 million accelerated share repurchase (ASR) program in Q1 2025.
In terms of analyst coverage, UBS and Goldman Sachs have assumed coverage on Southwest with a Sell rating, citing risks to future earnings and execution risks associated with strategic initiatives. However, BofA Securities, Citi, and TD Cowen have maintained or resumed coverage with Neutral or Hold ratings.
In leadership news, Southwest Airlines has appointed Rakesh Gangwal as the independent Chair of the Board of Directors. The company has also terminated its common stock purchase rights, a development disclosed in a recent 8-K filing with the Securities and Exchange Commission.
Lastly, the Transportation Security Administration (TSA) recently experienced its busiest day in history, screening over 3.087 million individuals at airports across the United States. This underscores the importance of early arrival during peak travel periods. These are the recent developments for Southwest Airlines.
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