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Here's Why Southwest Airlines Should Grace Your Portfolio
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Shares of the Dallas-based Southwest Airlines Co. (LUV - Free Report) have appreciated 3% in the last one month, outperforming the Zacks categorized Transportation-Airline industry’s gain of 1.4%.
Reasons Behind the Outperformance
Southwest Airlines announced that its board of directors approved a new share repurchase program worth $2 billion at its annual meeting of shareholders. The new buyback scheme will replace another $2 billion repurchase plan which was completed recently. Simultaneously, the company increased its quarterly dividend by 25% to $0.125 per share. The new dividend will be paid on Jun 28, 2017, to shareholders of record as of Jun 7.
In fact, the company has an impressive history of rewarding shareholders. Evidently, the company returned $673 million to shareholders through a combination of dividends and share repurchases in the first quarter of 2017.
We are also impressed by Southwest Airlines' employee-friendly approach. In Feb 2017, the carrier paid $586 million to its employees as part of its profit-sharing plan for 2016. This is the 43rd consecutive profit sharing arrangement at Southwest Airlines. In fact, the payment in 2016 equates to approximately 13.2% of each employee's earnings in the year.
The low-cost carrier’s guidance with respect to operating revenue per available seat miles (RASM: a key measure of unit revenues) also raises optimism. The metric is expected to grow in the band of 1% to 2% on a year-over-year basis. The company's April traffic report was encouraging as well.
Estimates on an Upswing
Notably, earnings estimates for Southwest Airlines have exhibited a healthy uptrend. Over the last 60 days, the Zacks Consensus Estimate for 2017 earnings has moved up 6 cents to $3.82 per share.
Likewise, the Zacks Consensus Estimate for the second quarter of 2017 has climbed 5 cents over the last two months to $1.18 per share. We are also impressed by the carrier’s consistent efforts to expand its operations.
In view of the above positives, we believe that this Zacks Rank #2 (Buy) company represents an attractive investment opportunity at current levels.
Other Gems in the Airline Space
Investors interested in the Airline space may also consider Hawaiian Holdings (HA - Free Report) , United Continental Holdings (UAL - Free Report) and Ryanair Holdings (RYAAY - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
We note that shares of Ryanair and United Continental have gained 28.2% and 9.3%, respectively, on a year-to-date basis. The Zacks Consensus Estimate for Hawaiian Holdings has moved up 42 cents to $5.19 per share over the last sixty days, for 2017.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Here's Why Southwest Airlines Should Grace Your Portfolio
Shares of the Dallas-based Southwest Airlines Co. (LUV - Free Report) have appreciated 3% in the last one month, outperforming the Zacks categorized Transportation-Airline industry’s gain of 1.4%.
Reasons Behind the Outperformance
Southwest Airlines announced that its board of directors approved a new share repurchase program worth $2 billion at its annual meeting of shareholders. The new buyback scheme will replace another $2 billion repurchase plan which was completed recently. Simultaneously, the company increased its quarterly dividend by 25% to $0.125 per share. The new dividend will be paid on Jun 28, 2017, to shareholders of record as of Jun 7.
In fact, the company has an impressive history of rewarding shareholders. Evidently, the company returned $673 million to shareholders through a combination of dividends and share repurchases in the first quarter of 2017.
We are also impressed by Southwest Airlines' employee-friendly approach. In Feb 2017, the carrier paid $586 million to its employees as part of its profit-sharing plan for 2016. This is the 43rd consecutive profit sharing arrangement at Southwest Airlines. In fact, the payment in 2016 equates to approximately 13.2% of each employee's earnings in the year.
The low-cost carrier’s guidance with respect to operating revenue per available seat miles (RASM: a key measure of unit revenues) also raises optimism. The metric is expected to grow in the band of 1% to 2% on a year-over-year basis. The company's April traffic report was encouraging as well.
Estimates on an Upswing
Notably, earnings estimates for Southwest Airlines have exhibited a healthy uptrend. Over the last 60 days, the Zacks Consensus Estimate for 2017 earnings has moved up 6 cents to $3.82 per share.
Likewise, the Zacks Consensus Estimate for the second quarter of 2017 has climbed 5 cents over the last two months to $1.18 per share. We are also impressed by the carrier’s consistent efforts to expand its operations.
In view of the above positives, we believe that this Zacks Rank #2 (Buy) company represents an attractive investment opportunity at current levels.
Other Gems in the Airline Space
Investors interested in the Airline space may also consider Hawaiian Holdings (HA - Free Report) , United Continental Holdings (UAL - Free Report) and Ryanair Holdings (RYAAY - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
We note that shares of Ryanair and United Continental have gained 28.2% and 9.3%, respectively, on a year-to-date basis. The Zacks Consensus Estimate for Hawaiian Holdings has moved up 42 cents to $5.19 per share over the last sixty days, for 2017.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>