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Southwest (LUV) Shares Up on Upbeat February Demand Trends
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Southwest Airlines Co. (LUV - Free Report) provided an investor update, wherein the company stated that it has seen an improvement in leisure passenger demand and bookings for February compared with its previous estimations. As a result of this increase in demand, the carrier anticipates its cash burn to improve in the first quarter compared with its initial expectations. Following this upbeat update, shares of Southwest closed yesterday’s trading session 1.2% higher.
In January, Southwest’s operating revenues declined 66% year over year (decreased 65% compared with January 2019), in-line with its expectations of a drop in the 65-70% range. Available seat miles (ASMs or capacity) were down approximately 40% year over year (down 42% from January 2019) in January 2021, compared with the expectation of a decline of around 41%. Meanwhile load factor (percentage of seats filled with passengers) in the month was 53% (within its estimation of 50-55%). Southwest’s average core cash burn was approximately $15 million per day last month.
With improving demand trends, for February, the company now estimates operating revenues to fall 65-70% both year over year as well as from the February 2019 level. Previously, the same was forecasted to decline 65-75%.. Operating revenues for March are estimated to drop 20-30% year over year and 55-65% from the 2019 levels.
February load factor is predicted to be 60-65%, much higher than the past expectation of 50-55%. The same is expected to be in the band of 60-70% in March. Additionally, Southwest estimates ASMs to plunge approximately 46% year over year (45% from the 2019 levels) in February. The same is expected to slip 15% year over year and 30% from the 2019 levels in March. Previously, the metric was anticipated to decrease 16% year over year.
For the first quarter, the company still expects capacity to decrease approximately 35% year over year and nearly 38% from first-quarter 2019. In April, the airline anticipates its capacity to increase approximately 81% year over year and decrease about 25% from April 2019.
Southwest maintains its expectations for economic fuel costs in the first quarter within the range of $1.60-$1.70 per gallon. Additionally, operating expenses, excluding fuel and oil expenses and special items, are still estimated to decline 15-20% year over year in the same period.
With the recent improvements in operating revenue trends, the company forecasts average core cash burn to be approximately $15 million per day in the first quarter, better than its previous expectation of around $17 million per day.
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Southwest (LUV) Shares Up on Upbeat February Demand Trends
Southwest Airlines Co. (LUV - Free Report) provided an investor update, wherein the company stated that it has seen an improvement in leisure passenger demand and bookings for February compared with its previous estimations. As a result of this increase in demand, the carrier anticipates its cash burn to improve in the first quarter compared with its initial expectations. Following this upbeat update, shares of Southwest closed yesterday’s trading session 1.2% higher.
In January, Southwest’s operating revenues declined 66% year over year (decreased 65% compared with January 2019), in-line with its expectations of a drop in the 65-70% range. Available seat miles (ASMs or capacity) were down approximately 40% year over year (down 42% from January 2019) in January 2021, compared with the expectation of a decline of around 41%. Meanwhile load factor (percentage of seats filled with passengers) in the month was 53% (within its estimation of 50-55%). Southwest’s average core cash burn was approximately $15 million per day last month.
With improving demand trends, for February, the company now estimates operating revenues to fall 65-70% both year over year as well as from the February 2019 level. Previously, the same was forecasted to decline 65-75%.. Operating revenues for March are estimated to drop 20-30% year over year and 55-65% from the 2019 levels.
Southwest Airlines Co. Price
Southwest Airlines Co. price | Southwest Airlines Co. Quote
February load factor is predicted to be 60-65%, much higher than the past expectation of 50-55%. The same is expected to be in the band of 60-70% in March. Additionally, Southwest estimates ASMs to plunge approximately 46% year over year (45% from the 2019 levels) in February. The same is expected to slip 15% year over year and 30% from the 2019 levels in March. Previously, the metric was anticipated to decrease 16% year over year.
For the first quarter, the company still expects capacity to decrease approximately 35% year over year and nearly 38% from first-quarter 2019. In April, the airline anticipates its capacity to increase approximately 81% year over year and decrease about 25% from April 2019.
Southwest maintains its expectations for economic fuel costs in the first quarter within the range of $1.60-$1.70 per gallon. Additionally, operating expenses, excluding fuel and oil expenses and special items, are still estimated to decline 15-20% year over year in the same period.
With the recent improvements in operating revenue trends, the company forecasts average core cash burn to be approximately $15 million per day in the first quarter, better than its previous expectation of around $17 million per day.
Zacks Rank & Key Picks
Southwest carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Transportation sector are ArcBest Corp. (ARCB - Free Report) , Saia, Inc. (SAIA - Free Report) and Herc Holdings Inc. (HRI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of ArcBest, Saia and Herc Holdings have rallied more than 73%, 62% and 75% in the past six months, respectively.
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Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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