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Southwest Airlines (LUV) March Traffic Grows, Stock Up
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Low-cost carrier Southwest Airlines Co. (LUV - Free Report) saw its shares gain 2.17% to $54.54 at the close of business on Apr 7, following the disclosure of its traffic report for the month of March. The company recorded a 3.9% year-over-year improvement in revenue passenger miles or RPMs (a measure of air traffic) on a year-over-year basis to 11.3 billion. Available seat miles or ASMs (a measure of capacity) expanded 4.5% to 13.4 billion.
Another important metric – load factor (percentage of seats filled by passengers) – deteriorated 50 basis points (bps) to 84.1% during the month as capacity expansion outpaced traffic growth, leading to relatively empty planes. For the first three months of 2017, Southwest Airlines reported a 3.3% rise in RPMs to 29.3 billion and a 4.1% increase ASMs to 36.7 billion. Total load factor contracted 60 bps to 79.9%.
We believe that more than the above readings, investors were pleased with the Dallas-based company reaffirming first-quarter 2017 unit revenues view. This seems to be the primary reason for the stock price appreciation. The low-cost carrier still expects operating revenue per ASM (RASM) in the first quarter (detailed results should be out on Apr 27) to decline in the band of 2% to 3%. Southwest Airlines’ decision to reiterate its unit revenue guidance is significant since Atlanta, GA-based Delta Air Lines (DAL - Free Report) recently trimmed its first-quarter 2017 forecast for passenger unit revenues for the second successive month.
Apart from sticking to its unit revenue view for the first quarter, this low-cost carrier unveiled a positive commentary on the current quarter. It stated that trends with respect to RASM and bookings “remain strong” for the second quarter.
Additionally, Southwest Airlines made news on the labor front. Southwest Airlines inked a tentative deal with the International Brotherhood of Teamsters pertaining to the terms of a new contract that covers material specialists of the low-cost carrier. Material specialists take care of Southwest Airlines’ technical operations inventory management across the system. The “Agreement in Principle” was reached last month.
We note that labor deals are in vogue in the airline space. Not only Southwest Airlines, but other players in the space like United Continental Holdings (UAL - Free Report) and American Airlines Group (AAL - Free Report) too have signed deals with various labor groups over the past few months.
Price Performance
We note that the Southwest Airlines stock has performed well of late, comfortably outperforming the Zacks categorized Transportation-Airline industry over the last three months. While the stock gained 5.51%, while the industry registred an increase of 1.22%.
The traffic growth in March and the most recent labor deal, albeit tentative, are further positives for the stock.
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>
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Southwest Airlines (LUV) March Traffic Grows, Stock Up
Low-cost carrier Southwest Airlines Co. (LUV - Free Report) saw its shares gain 2.17% to $54.54 at the close of business on Apr 7, following the disclosure of its traffic report for the month of March. The company recorded a 3.9% year-over-year improvement in revenue passenger miles or RPMs (a measure of air traffic) on a year-over-year basis to 11.3 billion. Available seat miles or ASMs (a measure of capacity) expanded 4.5% to 13.4 billion.
Another important metric – load factor (percentage of seats filled by passengers) – deteriorated 50 basis points (bps) to 84.1% during the month as capacity expansion outpaced traffic growth, leading to relatively empty planes. For the first three months of 2017, Southwest Airlines reported a 3.3% rise in RPMs to 29.3 billion and a 4.1% increase ASMs to 36.7 billion. Total load factor contracted 60 bps to 79.9%.
We believe that more than the above readings, investors were pleased with the Dallas-based company reaffirming first-quarter 2017 unit revenues view. This seems to be the primary reason for the stock price appreciation. The low-cost carrier still expects operating revenue per ASM (RASM) in the first quarter (detailed results should be out on Apr 27) to decline in the band of 2% to 3%. Southwest Airlines’ decision to reiterate its unit revenue guidance is significant since Atlanta, GA-based Delta Air Lines (DAL - Free Report) recently trimmed its first-quarter 2017 forecast for passenger unit revenues for the second successive month.
Apart from sticking to its unit revenue view for the first quarter, this low-cost carrier unveiled a positive commentary on the current quarter. It stated that trends with respect to RASM and bookings “remain strong” for the second quarter.
Additionally, Southwest Airlines made news on the labor front. Southwest Airlines inked a tentative deal with the International Brotherhood of Teamsters pertaining to the terms of a new contract that covers material specialists of the low-cost carrier. Material specialists take care of Southwest Airlines’ technical operations inventory management across the system. The “Agreement in Principle” was reached last month.
We note that labor deals are in vogue in the airline space. Not only Southwest Airlines, but other players in the space like United Continental Holdings (UAL - Free Report) and American Airlines Group (AAL - Free Report) too have signed deals with various labor groups over the past few months.
Price Performance
We note that the Southwest Airlines stock has performed well of late, comfortably outperforming the Zacks categorized Transportation-Airline industry over the last three months. While the stock gained 5.51%, while the industry registred an increase of 1.22%.
The traffic growth in March and the most recent labor deal, albeit tentative, are further positives for the stock.
Zacks Rank
Southwest Airlines currently carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>