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Southwest Airlines (LUV) Q3 Earnings in Line, Revenues Miss
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Southwest Airlines Co. (LUV - Free Report) reported third-quarter 2023 earnings per share (EPS) of 38 cents, which came in line with the Zacks Consensus Estimate but declined 24% on a year-over-year basis.
Revenues of $6,525 million lagged the Zacks Consensus Estimate of $6,570.3 million but improved 4.9% year over year. The uptick was due to solid leisure demand, especially in July and during the Labor Day holiday, coupled with all-time record quarterly ancillary revenues and record third-quarter loyalty program revenues. Although LUV experienced lower-than-expected close-in bookings in both August and September owing to seasonal trends, overall demand remained stable throughout the quarter. Third-quarter 2023 managed business revenues performed as expected, as LUV continued to benefit from business travel market share.
Southwest Airlines Co. Price, Consensus and EPS Surprise
Airline traffic, measured in revenue passenger miles, increased 6.2% year over year to 35.62 billion in the quarter under review. Capacity or available seat miles (ASMs) climbed 12.5% year over year to 44.16 billion. Load factor (percentage of seats filled by passengers) fell to 80.7% from 85.4% in the year-ago quarter.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) descended 6.4% year over year to 13.38 cents. Revenue per available seat mile (RASM) fell 6.8% to 14.77 cents.
Operating Expenses & Income
In the third quarter, Southwest Airlines incurred an operating income (as reported) of $117 million, down 70.4% year over year. On an adjusted basis (excluding special items), the company reported operating income of $224 million, down 47.3% year over year. Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 17.3%.
Fuel cost per gallon (inclusive of fuel tax: economic) fell 16.8% to $2.78. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items increased 4.4% year over year.
Liquidity
Southwest Airlines ended the third quarter with cash and cash equivalents of $9,497 million compared with $9,158 million at the end of June 2023. As of Sep 30, 2023, the company had long-term debt (less current maturities) of $7,984 million compared with $7,994 million at June 2023-end.
LUV generated $616 million of cash from operating activities in the reported quarter, while CapEx was $842 million.
Q4 & Full-Year Outlook
For fourth-quarter 2023, ASMs are estimated to improve 21% from the year-ago reported figure. Economic fuel costs per gallonare expected to be between $2.90 and $3.00. RASM is anticipated to decline 9-11% from the year-ago reported figure. LUV expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to decrease 16-19% in the fourth quarter from the comparable period in 2022. Interest expenses are expected to be $63 million in the fourth quarter.
For 2023, Southwest Airlines continues to expect capacity to improve 14-15% from the 2022 level. Economic fuel costs per gallon are now estimated to be between $2.85 and $2.95 (prior view: $2.70 and $2.80). CASM, excluding fuel, oil and profit-sharing expenses, and special items, is still anticipated to decrease 1-2% in 2023 from 2022.
Interest expenses are now expected to be $256 million (prior view: $255 million) in 2023. The effective tax rate is still expected to be 23% (prior view: 23-24%) in the year. Capital expenditures are still anticipated to be around $3.5 billion for 2023.
J.B. Hunt Transport Services, Inc.’s (JBHT - Free Report) third-quarter 2023 EPS of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.
JBHT’s total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and fell 18% year over year. Total operating revenues, excluding fuel surcharges, decreased 15% year over year.
Delta Air Lines, Inc. (DAL - Free Report) reported third-quarter 2023 EPS (excluding 31 cents from non-recurring items) of $2.03, which comfortably beat the Zacks Consensus Estimate of $1.92 and improved 35% on a year-over-year basis.
DAL’s revenues of $15,488 million beat the Zacks Consensus Estimate of $15,290.4 million and increased 11% on a year-over-year basis, driven by higher air-travel demand.
Alaska Air Group, Inc. (ALK - Free Report) reported third-quarter 2023EPS of $1.83, which missed the Zacks Consensus Estimate of $1.88 and declined 28% year over year.
Operating revenues of $2,839 million missed the Zacks Consensus Estimate of $2,876.1 million. The top line jumped 0.4% year over year, with passenger revenues accounting for 92.2% of the top line and increasing 0.1% owing to continued recovery in air-travel demand.
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Southwest Airlines (LUV) Q3 Earnings in Line, Revenues Miss
Southwest Airlines Co. (LUV - Free Report) reported third-quarter 2023 earnings per share (EPS) of 38 cents, which came in line with the Zacks Consensus Estimate but declined 24% on a year-over-year basis.
Revenues of $6,525 million lagged the Zacks Consensus Estimate of $6,570.3 million but improved 4.9% year over year. The uptick was due to solid leisure demand, especially in July and during the Labor Day holiday, coupled with all-time record quarterly ancillary revenues and record third-quarter loyalty program revenues. Although LUV experienced lower-than-expected close-in bookings in both August and September owing to seasonal trends, overall demand remained stable throughout the quarter. Third-quarter 2023 managed business revenues performed as expected, as LUV continued to benefit from business travel market share.
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 6.2% year over year to 35.62 billion in the quarter under review. Capacity or available seat miles (ASMs) climbed 12.5% year over year to 44.16 billion. Load factor (percentage of seats filled by passengers) fell to 80.7% from 85.4% in the year-ago quarter.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) descended 6.4% year over year to 13.38 cents. Revenue per available seat mile (RASM) fell 6.8% to 14.77 cents.
Operating Expenses & Income
In the third quarter, Southwest Airlines incurred an operating income (as reported) of $117 million, down 70.4% year over year. On an adjusted basis (excluding special items), the company reported operating income of $224 million, down 47.3% year over year. Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 17.3%.
Fuel cost per gallon (inclusive of fuel tax: economic) fell 16.8% to $2.78. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items increased 4.4% year over year.
Liquidity
Southwest Airlines ended the third quarter with cash and cash equivalents of $9,497 million compared with $9,158 million at the end of June 2023. As of Sep 30, 2023, the company had long-term debt (less current maturities) of $7,984 million compared with $7,994 million at June 2023-end.
LUV generated $616 million of cash from operating activities in the reported quarter, while CapEx was $842 million.
Q4 & Full-Year Outlook
For fourth-quarter 2023, ASMs are estimated to improve 21% from the year-ago reported figure. Economic fuel costs per gallonare expected to be between $2.90 and $3.00. RASM is anticipated to decline 9-11% from the year-ago reported figure. LUV expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to decrease 16-19% in the fourth quarter from the comparable period in 2022. Interest expenses are expected to be $63 million in the fourth quarter.
For 2023, Southwest Airlines continues to expect capacity to improve 14-15% from the 2022 level. Economic fuel costs per gallon are now estimated to be between $2.85 and $2.95 (prior view: $2.70 and $2.80). CASM, excluding fuel, oil and profit-sharing expenses, and special items, is still anticipated to decrease 1-2% in 2023 from 2022.
Interest expenses are now expected to be $256 million (prior view: $255 million) in 2023. The effective tax rate is still expected to be 23% (prior view: 23-24%) in the year. Capital expenditures are still anticipated to be around $3.5 billion for 2023.
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.
Performances of Other Transportation Companies
J.B. Hunt Transport Services, Inc.’s (JBHT - Free Report) third-quarter 2023 EPS of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.
JBHT’s total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and fell 18% year over year. Total operating revenues, excluding fuel surcharges, decreased 15% year over year.
Delta Air Lines, Inc. (DAL - Free Report) reported third-quarter 2023 EPS (excluding 31 cents from non-recurring items) of $2.03, which comfortably beat the Zacks Consensus Estimate of $1.92 and improved 35% on a year-over-year basis.
DAL’s revenues of $15,488 million beat the Zacks Consensus Estimate of $15,290.4 million and increased 11% on a year-over-year basis, driven by higher air-travel demand.
Alaska Air Group, Inc. (ALK - Free Report) reported third-quarter 2023 EPS of $1.83, which missed the Zacks Consensus Estimate of $1.88 and declined 28% year over year.
Operating revenues of $2,839 million missed the Zacks Consensus Estimate of $2,876.1 million. The top line jumped 0.4% year over year, with passenger revenues accounting for 92.2% of the top line and increasing 0.1% owing to continued recovery in air-travel demand.