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Southwest Airlines (LUV) Stock Down on Q1 Earnings Miss
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Low-cost carrier Southwest Airlines Co. (LUV - Free Report) reported lower-than-expected earnings and revenues in the first quarter of 2017. The carrier’s earnings per share (on an adjusted basis) of 61 cents missed the Zacks Consensus Estimate of 62 cents. Earnings also declined 30.68% year over year.
Operating revenues of $4,883 million marginally missed the Zacks Consensus Estimate of $4,894.1 million. Nevertheless, revenues improved 1.18% year over year. Passenger revenues accounted for the bulk (90.6%) of the top line. The underperformance disappointed investors, leading to the decline in the company’s shares in early trading.
Operating Statistics
Airline traffic, measured in revenue passenger miles, increased 3.3% year over year to $29.34 billion in the quarter under review. Capacity or available seat miles (ASMs) expanded 4.1% to $36.7 billion. Load factor (percentage of seats filled by passengers) came in at 79.9%, compared with 80.5% in the year-ago quarter, as capacity expansion outweighed traffic growth. Passenger revenue per available seat mile (PRASM: a key measure of unit revenue) fell 3.3% year over year to 12.06 cents. In the reported quarter, revenue per available seat mile (RASM) was 13.30 cents, down 2.8% year over year.
Operating Expenses & Income
In the first quarter, operating income came in at $658 million, compared with $944 million in the prior-year quarter. Excluding special items, operating income was $626 million, down 34.2%. Total adjusted operating expenses increased 11.3% year over year. Fuel price per gallon (inclusive of fuel tax: economic) climbed 10.1% year over year to $1.96. Consolidated unit cost or cost per available seat mile (CASM) – excluding fuel, oil and special items –increased 4.5% year over year to 8.98 cents.
Liquidity
At the end of the first quarter, Southwest Airlines had cash and cash equivalents of $1,851 million,compared with $1,680 million at the end of 2016. As of Mar 31, 2017, the company had long-term debt (less current maturities) of $2,781 million, as compared with $2,821 million at the end of 2016. While the carrier generated free cash flow of $1.2 billionin first-quarter 2017, it returned $673 million to shareholders through a combination of dividends and share repurchases.
Southwest Airlines Company Price, Consensus and EPS Surprise
The company expectsRASM growth of 1%--2% year over year in the second quarter of 2017. Economic fuel costs in the second quarter are expected in the range of $1.95 to $2.00 per gallon. Unit costs (excluding fuel and oil expenses, special items, and profit sharing expenses)in the second quarter are likely to increase 6% year over year. For full-year 2017, unit costs are expected to increase around 3% year over year, unchanged from the previous projection.
Investors interested in the broader transportation space keenly await the first-quarter earnings reports of Spirit Airlines (SAVE - Free Report) , Copa Holdings (CPA - Free Report) and Air Lease Corporation (AL - Free Report) , slated to be released on Apr 28, May 10 and May 4, respectively.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
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Southwest Airlines (LUV) Stock Down on Q1 Earnings Miss
Low-cost carrier Southwest Airlines Co. (LUV - Free Report) reported lower-than-expected earnings and revenues in the first quarter of 2017. The carrier’s earnings per share (on an adjusted basis) of 61 cents missed the Zacks Consensus Estimate of 62 cents. Earnings also declined 30.68% year over year.
Operating revenues of $4,883 million marginally missed the Zacks Consensus Estimate of $4,894.1 million. Nevertheless, revenues improved 1.18% year over year. Passenger revenues accounted for the bulk (90.6%) of the top line. The underperformance disappointed investors, leading to the decline in the company’s shares in early trading.
Operating Statistics
Airline traffic, measured in revenue passenger miles, increased 3.3% year over year to $29.34 billion in the quarter under review. Capacity or available seat miles (ASMs) expanded 4.1% to $36.7 billion. Load factor (percentage of seats filled by passengers) came in at 79.9%, compared with 80.5% in the year-ago quarter, as capacity expansion outweighed traffic growth. Passenger revenue per available seat mile (PRASM: a key measure of unit revenue) fell 3.3% year over year to 12.06 cents. In the reported quarter, revenue per available seat mile (RASM) was 13.30 cents, down 2.8% year over year.
Operating Expenses & Income
In the first quarter, operating income came in at $658 million, compared with $944 million in the prior-year quarter. Excluding special items, operating income was $626 million, down 34.2%. Total adjusted operating expenses increased 11.3% year over year. Fuel price per gallon (inclusive of fuel tax: economic) climbed 10.1% year over year to $1.96. Consolidated unit cost or cost per available seat mile (CASM) – excluding fuel, oil and special items –increased 4.5% year over year to 8.98 cents.
Liquidity
At the end of the first quarter, Southwest Airlines had cash and cash equivalents of $1,851 million,compared with $1,680 million at the end of 2016. As of Mar 31, 2017, the company had long-term debt (less current maturities) of $2,781 million, as compared with $2,821 million at the end of 2016. While the carrier generated free cash flow of $1.2 billionin first-quarter 2017, it returned $673 million to shareholders through a combination of dividends and share repurchases.
Southwest Airlines Company Price, Consensus and EPS Surprise
Southwest Airlines Company Price, Consensus and EPS Surprise | Southwest Airlines Company Quote
Guidance
The company expectsRASM growth of 1%--2% year over year in the second quarter of 2017. Economic fuel costs in the second quarter are expected in the range of $1.95 to $2.00 per gallon. Unit costs (excluding fuel and oil expenses, special items, and profit sharing expenses)in the second quarter are likely to increase 6% year over year. For full-year 2017, unit costs are expected to increase around 3% year over year, unchanged from the previous projection.
Zacks Rank
Southwest Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Key Releases Coming Up
Investors interested in the broader transportation space keenly await the first-quarter earnings reports of Spirit Airlines (SAVE - Free Report) , Copa Holdings (CPA - Free Report) and Air Lease Corporation (AL - Free Report) , slated to be released on Apr 28, May 10 and May 4, respectively.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>