Low cost carrier Southwest Airlines Co. (LUV - Free Report) reported mixed results for the second quarter of 2016, missing on earnings but beating on revenues. The carrier’s earnings per share (on an adjusted basis) of $1.19 fell short of the Zacks Consensus Estimate of $1.22. Earnings, however, increased 15.5% on a year-over-year basis.
Southwest Airlines reported revenues of $5,384 million which edged past the Zacks Consensus Estimate of $5,372 million. Revenues increased 5.3% year over year. Passenger revenues accounted for the bulk (91.1%) of the top line. Passenger revenues improved 1.1% on a year-over-year basis.
Operating Statistics
Airline traffic, measured revenue passenger miles, increased 6% year over year to 32.71 billion in the quarter under review. Capacity or available seat miles increased 4.8% to 38.22 billion, while load factor (percentage of seats filled by passengers) came in at 85.6% compared with 84.6% in the year-ago quarter as traffic growth outweighed capacity expansion. Meanwhile, passenger revenue per available seat mile (PRASM) fell 3.5% year over year to 12.83 cents. In the reported quarter, revenue per available seat mile (RASM) was 14.09 cents, up 0.6% year over year.
Operating Expenses & Income
In the second quarter of 2016, operating income came in at $1.3 billion, up 18% year over year mainly. Total adjusted operating expenses increased 3.9% year over year to $4,117 million. Fuel price (economic) stood at $1.81 per gallon, down from $2.02 recorded a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, increased 2.1% year over year to 7.79 cents.
Liquidity
At the end of second-quarter 2016, Southwest Airlines had $3,415 million in cash and short-term investments compared with $3,051 million at the end of 2015. In the reported quarter, the company had long-term debt (less current maturities) of $2,391 million compared with $2,541 million at the end of 2015. The carrier generated free cash flow of $649 million in the quarter and returned $763 million to shareholders through buybacks/dividend payments.
Q3 Guidance
Southwest Airlines anticipates RASM decline in the band of 3% to 4% in the third quarter of 2016. Fuel costs (economic) are projected to be $2.05 per gallon.
Zacks Rank & Key Picks
Southwest Airlines currently carries a Zacks Rank #5 (Strong Sell). Better-ranked airline stocks include Cathay Pacific Airways (CPCAY - Free Report) with a Zacks Rank #1 (Strong Buy) and ANA Holdings (ALNPY - Free Report) and LATAM Holdings with a Zacks Rank #2 (Buy).
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Low cost carrier Southwest Airlines Co. (LUV - Free Report) reported mixed results for the second quarter of 2016, missing on earnings but beating on revenues. The carrier’s earnings per share (on an adjusted basis) of $1.19 fell short of the Zacks Consensus Estimate of $1.22. Earnings, however, increased 15.5% on a year-over-year basis.
Southwest Airlines reported revenues of $5,384 million which edged past the Zacks Consensus Estimate of $5,372 million. Revenues increased 5.3% year over year. Passenger revenues accounted for the bulk (91.1%) of the top line. Passenger revenues improved 1.1% on a year-over-year basis.
Operating Statistics
Airline traffic, measured revenue passenger miles, increased 6% year over year to 32.71 billion in the quarter under review. Capacity or available seat miles increased 4.8% to 38.22 billion, while load factor (percentage of seats filled by passengers) came in at 85.6% compared with 84.6% in the year-ago quarter as traffic growth outweighed capacity expansion. Meanwhile, passenger revenue per available seat mile (PRASM) fell 3.5% year over year to 12.83 cents. In the reported quarter, revenue per available seat mile (RASM) was 14.09 cents, up 0.6% year over year.
Operating Expenses & Income
In the second quarter of 2016, operating income came in at $1.3 billion, up 18% year over year mainly. Total adjusted operating expenses increased 3.9% year over year to $4,117 million. Fuel price (economic) stood at $1.81 per gallon, down from $2.02 recorded a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, increased 2.1% year over year to 7.79 cents.
Liquidity
At the end of second-quarter 2016, Southwest Airlines had $3,415 million in cash and short-term investments compared with $3,051 million at the end of 2015. In the reported quarter, the company had long-term debt (less current maturities) of $2,391 million compared with $2,541 million at the end of 2015. The carrier generated free cash flow of $649 million in the quarter and returned $763 million to shareholders through buybacks/dividend payments.
Q3 Guidance
Southwest Airlines anticipates RASM decline in the band of 3% to 4% in the third quarter of 2016. Fuel costs (economic) are projected to be $2.05 per gallon.
Zacks Rank & Key Picks
Southwest Airlines currently carries a Zacks Rank #5 (Strong Sell). Better-ranked airline stocks include Cathay Pacific Airways (CPCAY - Free Report) with a Zacks Rank #1 (Strong Buy) and ANA Holdings (ALNPY - Free Report) and LATAM Holdings with a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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