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Southwest Airlines Co. (LUV - Free Report) reported mixed third-quarter 2022 results wherein earnings outpaced the Zacks Consensus Estimate but revenues missed the same.
Quarterly earnings of 50 cents per share outpaced the Zacks Consensus Estimate of 41 cents. Moreover, the bottom line improved by more than 100% year over year.
Revenues of $6,220 million lagged the Zacks Consensus Estimate of $6,228.1 million but improved 32.9% year over year on the back of improvement in leisure demand and close-in bookings in September 2022. The company’s top line also benefited from its loyalty program, including elevated point redemptions for flights and incremental revenues from its co-brand credit card agreement, along with increased upgraded boarding take-rates following the new digital self-service launch in August 2022. However, LUV had to bear an unfavorable impact of nearly $18 million due to the flight disruptions caused by Hurricane Ian in late September 2022.
Southwest Airlines Co. Price, Consensus and EPS Surprise
Airline traffic, measured in revenue passenger miles, increased 7.2% year over year to 33.53 billion in the quarter under review. Capacity or available seat miles (ASMs) climbed 1.3% year over year to 39.27 billion. The load factor (percentage of seats filled by passengers) improved to 85.4% from 80.7% in the year-ago quarter as traffic growth outweighed capacity expansion.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) ascended 31% year over year to 14.29 cents. Revenue per available seat mile (RASM) improved 31.2% to 15.84 cents.
Operating Expenses & Income
In the third quarter, Southwest incurred an operating income (as reported) of $395 million compared with $733 million in the year-ago period. On an adjusted basis (excluding special items), the company reported an operating income of $425 million against a loss of $59 million. Total adjusted operating expenses (excluding profit sharing, special items, and fuel and oil expenses) increased 9.8%.
Fuel cost per gallon (inclusive of fuel tax: economic) rose 68.7% to $3.39. However, consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items, increased 8.4% year over year.
Liquidity
Southwest Airlines ended the third quarter with cash and cash equivalents of $10,443 million compared with $13,234 million at the end of June 2022. As of Sep 30, 2022, the company had long-term debt (less current maturities) of $8,315 million compared with $8,877 million at the end of June 2022.
Q4 & Full-Year Outlook
For fourth-quarter 2022, operating revenues are expected to register 13-17% growth compared with 2019. ASMs are estimated to decline 2% from the comparable period in 2019. Economic fuel costs per gallon are expected to be $3.15 to $3.25. LUV expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase 14-18% in the fourth quarter from the comparable period in 2019. Interest expenses are expected to be $70 million in the fourth quarter.
For 2022, Southwest now expects capacity to decline approximately 4.5% (prior view: down 4%) from the 2019 level. Economic fuel costs per gallon are now estimated between $3.05 and $3.15 (prior view: $2.95 - $3.05). CASM, excluding fuel, oil and profit-sharing expenses, and special items, is anticipated to increase 14-15% (prior view: 12-16%) in 2022 from 2019. Interest expenses are expected to be $340 million compared with the prior view of $360 million in 2022.
The effective tax rate is still expected to be 24-26% in the year. Capital expenditures are still anticipated at around $4 billion for 2022.
Delta AirLines’(DAL - Free Report) third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. Escalated operating expenses induced the earnings miss. Multiple flight cancelations and booking weaknesses due to Hurricane Ian also hurt results. DAL reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
DAL reported revenues of $13,975 million, which lagged the Zacks Consensus Estimate of $14,157.2 million. Driven by the high air-travel demand, total revenues increased more than 52% on a year-over-year basis.
United Airlines’ (UAL - Free Report) third-quarter 2022 earnings (excluding 5 cents from non-recurring items) of $2.81 per share beat the Zacks Consensus Estimate of $2.21 and our estimate of $2.17. An upbeat in air-travel demand aided results.
In the year-ago quarter, UAL incurred a loss of $1.02 per share when air-travel demand was not as buoyant as in the current scenario. The third quarter of 2022 was the second consecutive profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,877 million beat the Zacks Consensus Estimate of $12,709.5 million and our estimate of $12, 631.6 million. UAL’s revenues increased more than 66% year over year owing to an upbeat in air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 13.2% from third-quarter 2019 (pre-coronavirus) levels.
J.B. Hunt Transport Services, Inc. (JBHT - Free Report) reported better-than-expected third-quarter 2022 results, wherein both earnings and revenues outperformed the Zacks Consensus Estimate.JBHT’s quarterly earnings of $2.57 per share surpassed the Zacks Consensus Estimate of $2.45 and improved 36.7% year over year.
JBHT’s operating revenues of $3,838.3 million also outperformed the Zacks Consensus Estimate of $3803.4 million. The top line jumped 22.1% year over year on the back of strength across — Dedicated Contract Services, Intermodal, Truckload and Final Mile Services segments. Total operating revenues, excluding fuel surcharges, rose 12.4% year over year.
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Southwest Airlines (LUV) Q3 Earnings Beat, 2022 View Tweaked
Southwest Airlines Co. (LUV - Free Report) reported mixed third-quarter 2022 results wherein earnings outpaced the Zacks Consensus Estimate but revenues missed the same.
Quarterly earnings of 50 cents per share outpaced the Zacks Consensus Estimate of 41 cents. Moreover, the bottom line improved by more than 100% year over year.
Revenues of $6,220 million lagged the Zacks Consensus Estimate of $6,228.1 million but improved 32.9% year over year on the back of improvement in leisure demand and close-in bookings in September 2022. The company’s top line also benefited from its loyalty program, including elevated point redemptions for flights and incremental revenues from its co-brand credit card agreement, along with increased upgraded boarding take-rates following the new digital self-service launch in August 2022. However, LUV had to bear an unfavorable impact of nearly $18 million due to the flight disruptions caused by Hurricane Ian in late September 2022.
Southwest Airlines Co. Price, Consensus and EPS Surprise
Southwest Airlines Co. price-consensus-eps-surprise-chart | Southwest Airlines Co. Quote
Operating Statistics
Airline traffic, measured in revenue passenger miles, increased 7.2% year over year to 33.53 billion in the quarter under review. Capacity or available seat miles (ASMs) climbed 1.3% year over year to 39.27 billion. The load factor (percentage of seats filled by passengers) improved to 85.4% from 80.7% in the year-ago quarter as traffic growth outweighed capacity expansion.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) ascended 31% year over year to 14.29 cents. Revenue per available seat mile (RASM) improved 31.2% to 15.84 cents.
Operating Expenses & Income
In the third quarter, Southwest incurred an operating income (as reported) of $395 million compared with $733 million in the year-ago period. On an adjusted basis (excluding special items), the company reported an operating income of $425 million against a loss of $59 million. Total adjusted operating expenses (excluding profit sharing, special items, and fuel and oil expenses) increased 9.8%.
Fuel cost per gallon (inclusive of fuel tax: economic) rose 68.7% to $3.39. However, consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items, increased 8.4% year over year.
Liquidity
Southwest Airlines ended the third quarter with cash and cash equivalents of $10,443 million compared with $13,234 million at the end of June 2022. As of Sep 30, 2022, the company had long-term debt (less current maturities) of $8,315 million compared with $8,877 million at the end of June 2022.
Q4 & Full-Year Outlook
For fourth-quarter 2022, operating revenues are expected to register 13-17% growth compared with 2019. ASMs are estimated to decline 2% from the comparable period in 2019. Economic fuel costs per gallon are expected to be $3.15 to $3.25. LUV expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase 14-18% in the fourth quarter from the comparable period in 2019. Interest expenses are expected to be $70 million in the fourth quarter.
For 2022, Southwest now expects capacity to decline approximately 4.5% (prior view: down 4%) from the 2019 level. Economic fuel costs per gallon are now estimated between $3.05 and $3.15 (prior view: $2.95 - $3.05). CASM, excluding fuel, oil and profit-sharing expenses, and special items, is anticipated to increase 14-15% (prior view: 12-16%) in 2022 from 2019. Interest expenses are expected to be $340 million compared with the prior view of $360 million in 2022.
The effective tax rate is still expected to be 24-26% in the year. Capital expenditures are still anticipated at around $4 billion for 2022.
Currently, Southwest Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Transportation Companies
Delta AirLines’(DAL - Free Report) third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. Escalated operating expenses induced the earnings miss. Multiple flight cancelations and booking weaknesses due to Hurricane Ian also hurt results. DAL reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
DAL reported revenues of $13,975 million, which lagged the Zacks Consensus Estimate of $14,157.2 million. Driven by the high air-travel demand, total revenues increased more than 52% on a year-over-year basis.
United Airlines’ (UAL - Free Report) third-quarter 2022 earnings (excluding 5 cents from non-recurring items) of $2.81 per share beat the Zacks Consensus Estimate of $2.21 and our estimate of $2.17. An upbeat in air-travel demand aided results.
In the year-ago quarter, UAL incurred a loss of $1.02 per share when air-travel demand was not as buoyant as in the current scenario. The third quarter of 2022 was the second consecutive profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,877 million beat the Zacks Consensus Estimate of $12,709.5 million and our estimate of $12, 631.6 million. UAL’s revenues increased more than 66% year over year owing to an upbeat in air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 13.2% from third-quarter 2019 (pre-coronavirus) levels.
J.B. Hunt Transport Services, Inc. (JBHT - Free Report) reported better-than-expected third-quarter 2022 results, wherein both earnings and revenues outperformed the Zacks Consensus Estimate.JBHT’s quarterly earnings of $2.57 per share surpassed the Zacks Consensus Estimate of $2.45 and improved 36.7% year over year.
JBHT’s operating revenues of $3,838.3 million also outperformed the Zacks Consensus Estimate of $3803.4 million. The top line jumped 22.1% year over year on the back of strength across — Dedicated Contract Services, Intermodal, Truckload and Final Mile Services segments. Total operating revenues, excluding fuel surcharges, rose 12.4% year over year.