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What's in the Cards for Southwest (LUV) This Earnings Season?
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Southwest Airlines Co. (LUV - Free Report) is scheduled to report fourth-quarter 2020 results on Jan 28, before market open.
The Zacks Consensus Estimate for the company’s fourth-quarter loss has widened to $1.66 per share from a loss of $1.57 estimated 60 days ago. The company has an average record with respect to earnings per share, having outpaced the Zacks Consensus Estimate in two of the last four quarters (missing the same in remaining two). It has a trailing four-quarter earnings surprise of 17.5%, on average.
Against this backdrop, let’s take a look at the factors that are expected to have influenced its performance in the quarter.
Akin to the third quarter, Southwest Airlines’ fourth-quarter performance is likely to have been dented by the coronavirus-induced weak passenger revenues as air-travel demand remains tepid. The Zacks Consensus Estimate for December-end quarter passenger revenues indicates an approximately 64.7% plunge from the year-ago quarter’s reported number.
In order to mitigate the low-demand scenario, the carrier is trimming its capacity. The airline predicts capacity to fall approximately 40% year over year in the quarter under review (October-December). The consensus mark for available seat miles (or capacity) suggests a 40.3% fall in the fourth quarter from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for traffic (measured in revenue passenger miles) suggests a drop of 58.5% from the prior-year quarter’s reported figure.
With traffic declining faster than capacity cuts, load factor (% of seats filled by passengers) is likely to have tanked in the fourth quarter. Notably, the Zacks Consensus Estimate for Southwest Airlines’ fourth-quarter 2020 passenger load factor is pegged at a dismal 58%, which calls for a significant decline from 83% reported in fourth-quarter 2019.
Nevertheless, with fuel expenses comprising a major chunk of airline expenditures, low fuel prices are anticipated to have aided the bottom line. The company estimates economic fuel costs in the range of $1.2-$1.3 per gallon in the fourth quarter compared with $2.09 in the year-ago quarter. The Zacks Consensus Estimate for the same is at $1.31 per gallon, which indicates a decline of 37.3% on a year-over-year basis.
Earnings Whispers
The proven Zacks model does not conclusively predict an earnings beat for Southwest this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP: Southwest has an Earnings ESP of -9.19% as the Most Accurate Estimate is pegged at a loss of $1.81, while the Zacks Consensus Estimate is pinned at a loss of $1.66. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Southwest carries a Zacks Rank #3.
Highlights of Q3
In the last reported quarter, the company incurred a loss of $1.99 per share (excluding 3 cents from non-recurring items) in the third quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.44. In the year-ago quarter, the company had reported earnings of $1.23 per share. Results were affected by significant decline in passenger revenues as a result of persistent weakness in air-travel demand amid coronavirus concerns.
Stocks to Consider
Investors interested in the broader Transportation sector may consider C.H. Robinson Worldwide, Inc. (CHRW - Free Report) , Knight-Swift Transportation Holdings Inc. (KNX - Free Report) and Landstar System, Inc. (LSTR - Free Report) as these stocks possess the right combination of elements to beat on earnings this reporting cycle.
C.H. Robinson has an Earnings ESP of +0.12% and is Zacks #3 Ranked, presently. The company will release fourth-quarter 2020 results on Jan 26.
Knight-Swift has an Earnings ESP of +1.10% and a Zacks Rank of 3 at present. The company will release fourth-quarter 2020 results on Jan 27.
Landstar System has an Earnings ESP of +0.57% and is currently a #3 Ranked player. The company will release fourth-quarter 2020 results on Jan 27.
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What's in the Cards for Southwest (LUV) This Earnings Season?
Southwest Airlines Co. (LUV - Free Report) is scheduled to report fourth-quarter 2020 results on Jan 28, before market open.
The Zacks Consensus Estimate for the company’s fourth-quarter loss has widened to $1.66 per share from a loss of $1.57 estimated 60 days ago. The company has an average record with respect to earnings per share, having outpaced the Zacks Consensus Estimate in two of the last four quarters (missing the same in remaining two). It has a trailing four-quarter earnings surprise of 17.5%, on average.
Against this backdrop, let’s take a look at the factors that are expected to have influenced its performance in the quarter.
Southwest Airlines Co. Price and EPS Surprise
Southwest Airlines Co. price-eps-surprise | Southwest Airlines Co. Quote
Akin to the third quarter, Southwest Airlines’ fourth-quarter performance is likely to have been dented by the coronavirus-induced weak passenger revenues as air-travel demand remains tepid. The Zacks Consensus Estimate for December-end quarter passenger revenues indicates an approximately 64.7% plunge from the year-ago quarter’s reported number.
In order to mitigate the low-demand scenario, the carrier is trimming its capacity. The airline predicts capacity to fall approximately 40% year over year in the quarter under review (October-December). The consensus mark for available seat miles (or capacity) suggests a 40.3% fall in the fourth quarter from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for traffic (measured in revenue passenger miles) suggests a drop of 58.5% from the prior-year quarter’s reported figure.
With traffic declining faster than capacity cuts, load factor (% of seats filled by passengers) is likely to have tanked in the fourth quarter. Notably, the Zacks Consensus Estimate for Southwest Airlines’ fourth-quarter 2020 passenger load factor is pegged at a dismal 58%, which calls for a significant decline from 83% reported in fourth-quarter 2019.
Nevertheless, with fuel expenses comprising a major chunk of airline expenditures, low fuel prices are anticipated to have aided the bottom line. The company estimates economic fuel costs in the range of $1.2-$1.3 per gallon in the fourth quarter compared with $2.09 in the year-ago quarter. The Zacks Consensus Estimate for the same is at $1.31 per gallon, which indicates a decline of 37.3% on a year-over-year basis.
Earnings Whispers
The proven Zacks model does not conclusively predict an earnings beat for Southwest this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP: Southwest has an Earnings ESP of -9.19% as the Most Accurate Estimate is pegged at a loss of $1.81, while the Zacks Consensus Estimate is pinned at a loss of $1.66. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Southwest carries a Zacks Rank #3.
Highlights of Q3
In the last reported quarter, the company incurred a loss of $1.99 per share (excluding 3 cents from non-recurring items) in the third quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.44. In the year-ago quarter, the company had reported earnings of $1.23 per share. Results were affected by significant decline in passenger revenues as a result of persistent weakness in air-travel demand amid coronavirus concerns.
Stocks to Consider
Investors interested in the broader Transportation sector may consider C.H. Robinson Worldwide, Inc. (CHRW - Free Report) , Knight-Swift Transportation Holdings Inc. (KNX - Free Report) and Landstar System, Inc. (LSTR - Free Report) as these stocks possess the right combination of elements to beat on earnings this reporting cycle.
C.H. Robinson has an Earnings ESP of +0.12% and is Zacks #3 Ranked, presently. The company will release fourth-quarter 2020 results on Jan 26.
Knight-Swift has an Earnings ESP of +1.10% and a Zacks Rank of 3 at present. The company will release fourth-quarter 2020 results on Jan 27.
Landstar System has an Earnings ESP of +0.57% and is currently a #3 Ranked player. The company will release fourth-quarter 2020 results on Jan 27.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>