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Here's Why You Should Discard Southwest Airlines (LUV) Now

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Southwest Airlines Co. ‘s (LUV - Free Report) shares have declined 14.7% in the past six months compared with a 14.2% fall of the industry it belongs to.

Zacks Investment Research
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Coronavirus-led low air-travel demand has resulted in Southwest Airlines incurring a loss for six successive quarters. Adding to its woes, the spread of the Delta variant is likely to dampen the September-quarter results. Management now expects third-quarter 2021 operating revenues to plunge in the 18-20% range from third-quarter 2019 actuals (former view was a 15-20% decline). Operating revenues for October are also expected to decline between 20% and 30%.

Rising fuel prices hurt the airline’s bottom-line results. Fuel cost per gallon (inclusive of fuel tax: economic) rose 44.4% year over year to $1.92 in the second quarter. The airline anticipates economic fuel costs per gallon in the range of $2.05-$2.15 in both the third and the fourth quarters of 2021.  

The company’s current year bottom-line results have widened from a loss of $1.23 per share to a loss of $1.87 in the past 60 days.  Moreover, Southwest Airlines, currently carrying a Zacks Rank# 4 (Sell), has a Momentum Score of F. This reflects on the stock’s short-term unattractiveness. In view of the above-mentioned headwinds, we believe that investors should get rid of the stock from their respective portfolios. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks in the broader Zacks Transportation sector are Schneider National, Inc. (SNDR - Free Report) , Landstar System, Inc. (LSTR - Free Report) and TFI International Inc. (TFII - Free Report) . All the stocks carry a Zacks Rank #2 (Buy).

Long-term expected earnings per share (three to five years) growth rate for Schneider National, Landstar and TFI International is pegged at 17.9%, 12% and 31.6%, respectively.

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