Shares of Southwest Airlines Co. (LUV - Free Report) have lost 24.6% compared with the industry's 44.2% decline in a years’ time. The disappointing performance was primarily caused by the coronavirus-induced low air traffic demand apart from the prolonged grounding of the 34 Boeing 737 MAX jets in its fleet.
Let’s take a detailed look into the factors hurting the stock.
Southwest Airlines witnessed a sharp fall in passenger bookings due to the coronavirus outbreak. The carrier recently issued a bearish view on revenue per available seat miles (RASM: a key measure of unit revenues) for first-quarter 2020. The company now anticipates first-quarter TRASM to either dip 2% or inch up to 1% from the year-ago quarter’s figure.
Moreover, drop in traffic demand is expected to persist for the rest of March, given the rapid spread of COVID-19. Consequently, first-quarter operating revenues are expected to decline $200-$300 million. To tackle the low-demand scenario, the carrier aims to reduce capacity by a minimum 20% in the Apr 14-Jun 5 period.
Since the carrier has 34 Boeing 737 MAX jets in its fleet, prolonged grounding since March 2019 is significantly hurting the company. Apart from incurring high non-fuel unit costs, the carrier’s operating income was hurt to the tune of $828 million in 2019. Also, Southwest Airlines expects the jets to remain grounded through early August 2020.
Zacks Rank & Stocks to consider
Southwest Airlines carries a Zacks Rank #3 (Hold).
Few better-ranked stocks in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) , Ryanair Holdings plc (RYAAY - Free Report) and Spirit Airlines, Inc. (SAVE - Free Report) . GATX sports a Zacks Rank # 1 (Strong Buy), whereas Ryanair and Spirit Airlines carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected earnings per share (three to five years) growth rate for GATX, Ryanair and Spirit Airlines is pegged at 15%, 16.6% and 12.5%, respectively.
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Shares of Southwest Airlines Co. (LUV - Free Report) have lost 24.6% compared with the industry's 44.2% decline in a years’ time. The disappointing performance was primarily caused by the coronavirus-induced low air traffic demand apart from the prolonged grounding of the 34 Boeing 737 MAX jets in its fleet.
Let’s take a detailed look into the factors hurting the stock.
Southwest Airlines witnessed a sharp fall in passenger bookings due to the coronavirus outbreak. The carrier recently issued a bearish view on revenue per available seat miles (RASM: a key measure of unit revenues) for first-quarter 2020. The company now anticipates first-quarter TRASM to either dip 2% or inch up to 1% from the year-ago quarter’s figure.
Moreover, drop in traffic demand is expected to persist for the rest of March, given the rapid spread of COVID-19. Consequently, first-quarter operating revenues are expected to decline $200-$300 million. To tackle the low-demand scenario, the carrier aims to reduce capacity by a minimum 20% in the Apr 14-Jun 5 period.
Since the carrier has 34 Boeing 737 MAX jets in its fleet, prolonged grounding since March 2019 is significantly hurting the company. Apart from incurring high non-fuel unit costs, the carrier’s operating income was hurt to the tune of $828 million in 2019. Also, Southwest Airlines expects the jets to remain grounded through early August 2020.
Zacks Rank & Stocks to consider
Southwest Airlines carries a Zacks Rank #3 (Hold).
Few better-ranked stocks in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) , Ryanair Holdings plc (RYAAY - Free Report) and Spirit Airlines, Inc. (SAVE - Free Report) . GATX sports a Zacks Rank # 1 (Strong Buy), whereas Ryanair and Spirit Airlines carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected earnings per share (three to five years) growth rate for GATX, Ryanair and Spirit Airlines is pegged at 15%, 16.6% and 12.5%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
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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