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Southwest Airlines (LUV) Beats on Q3 Earnings & Revenues
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Low cost carrier, Southwest Airlines Co. (LUV - Free Report) reported impressive results for the third quarter of 2016. The company beat earnings estimates and delivered better-than-expected revenues. The carrier’s earnings per share (on an adjusted basis) of 93 cents beat the Zacks Consensus Estimate of 88 cents.
Southwest Airlines reported revenues of $5,139 million, which edged past the Zacks Consensus Estimate of $5,132 million. Revenues inched up 3.4% year over year. Passenger revenues accounted for the bulk of the top line. Revenues declined 1% on a year-over-year basis.
Operating Statistics
Airline traffic, measured revenue passenger miles, increased 4.1% year over year to 32.31 billion in the quarter under review. Capacity or available seat miles expanded 4.2% to 37.88 billion. Load factor (percentage of seats filled by passengers) came in at 85.3% compared with 85.4% in the year-ago quarter as capacity expansion outweighed traffic growth. Passenger revenue per available seat mile (PRASM) fell 5% year over year to 12.32 cents. In the reported quarter, revenue per available seat mile (RASM) was 13.57 cents, down 4.1% year over year.
Operating Expenses & Income
In the third quarter, operating income came in at $695 million as against $1.2 billion in the prior-year quarter. Excluding special items, operating income was $972 million. Total adjusted operating expenses increased 8.6% year over year to $4,444 million. Fuel price (economic) was $2.02 per gallon as against $2.20 a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, decreased 0.2% year over year to 8.26 cents.
At the end of the third quarter, Southwest Airlines had $3.4 billion in cash and short-term investments compared with $3.1 billion at the end of 2015. In the reported quarter, the company had long-term debt (less current maturities) of $2,323 million as against $2,541 million at the end of 2015. The carrier generated free cash flow of $392 million in the quarter and returned $312 million to shareholders through buybacks and dividend payments.
Southwest Airlines anticipates RASM to decline in the band of 4–5% year over year in the fourth quarter. Fuel costs (economic) are projected to be $2.10 per gallon.
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Southwest Airlines (LUV) Beats on Q3 Earnings & Revenues
Low cost carrier, Southwest Airlines Co. (LUV - Free Report) reported impressive results for the third quarter of 2016. The company beat earnings estimates and delivered better-than-expected revenues. The carrier’s earnings per share (on an adjusted basis) of 93 cents beat the Zacks Consensus Estimate of 88 cents.
Southwest Airlines reported revenues of $5,139 million, which edged past the Zacks Consensus Estimate of $5,132 million. Revenues inched up 3.4% year over year. Passenger revenues accounted for the bulk of the top line. Revenues declined 1% on a year-over-year basis.
Operating Statistics
Airline traffic, measured revenue passenger miles, increased 4.1% year over year to 32.31 billion in the quarter under review. Capacity or available seat miles expanded 4.2% to 37.88 billion. Load factor (percentage of seats filled by passengers) came in at 85.3% compared with 85.4% in the year-ago quarter as capacity expansion outweighed traffic growth. Passenger revenue per available seat mile (PRASM) fell 5% year over year to 12.32 cents. In the reported quarter, revenue per available seat mile (RASM) was 13.57 cents, down 4.1% year over year.
Operating Expenses & Income
In the third quarter, operating income came in at $695 million as against $1.2 billion in the prior-year quarter. Excluding special items, operating income was $972 million. Total adjusted operating expenses increased 8.6% year over year to $4,444 million. Fuel price (economic) was $2.02 per gallon as against $2.20 a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, decreased 0.2% year over year to 8.26 cents.
Southwest Airlines has been striving to improve its operational efficiency. The Zacks Rank #5 (Strong Sell) company faces tough competition from peers such as JetBlue Airways Co. (JBLU - Free Report) , Spirit Airlines Inc. (SAVE - Free Report) and Hawaiian Holdings Inc. (HA - Free Report) , all of which carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Liquidity
At the end of the third quarter, Southwest Airlines had $3.4 billion in cash and short-term investments compared with $3.1 billion at the end of 2015. In the reported quarter, the company had long-term debt (less current maturities) of $2,323 million as against $2,541 million at the end of 2015. The carrier generated free cash flow of $392 million in the quarter and returned $312 million to shareholders through buybacks and dividend payments.
SOUTHWEST AIR Price, Consensus and EPS Surprise
SOUTHWEST AIR Price, Consensus and EPS Surprise | SOUTHWEST AIR Quote
Fourth-Quarter Guidance
Southwest Airlines anticipates RASM to decline in the band of 4–5% year over year in the fourth quarter. Fuel costs (economic) are projected to be $2.10 per gallon.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>