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Why Investors Should Buy Southwest Airlines (LUV) Stock Now

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Southwest Airlines Co. (LUV - Free Report) is currently benefiting from improving air-travel demand and strong liquidity.  

Against this backdrop, let’s look at the factors that make this stock an attractive pick.

Solid Rank & VGM Score: Southwest Airlines currently has a Zacks Rank #1 (Strong   Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank of 1 or 2, offer the best investment opportunities. Thus, LUV seems an appropriate investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: Eight estimates for 2022 have moved north in the past 60 days, indicative of analysts’ confidence in the stock. The Zacks Consensus Estimate for 2022 earnings has moved up 97.4% in the past 60 days.

Positive Earnings Surprise History: Southwest Airlines has an encouraging earnings surprise history. Earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, the average surprise being 33.5%.

Strong Prospects: The Zacks Consensus Estimate for 2022 earnings is pegged at $2.31, implying growth of 207.4% from the year-ago reported figure. Southwest Airlines’ long-term expected earnings per share (EPS) growth rate is 11%.

Driving Factors: Continued recovery in air-travel demand bodes well for Southwest Airlines. Anticipating a continued improvement in bookings, the carrier expects to reap profits in the remaining three quarters of 2022 as well as for the full year. Management predicts operating revenues to increase 8-12% in the second quarter from the comparable period’s level in 2019.

Southwest Airlines' liquidity position raises optimism on the stock. At the end of the March quarter, the carrier’s cash and cash equivalents stood at $13,098 million, much higher than the current maturities of its long-term debt of $415 million, suggesting that LUV has sufficient cash to meet its current debt obligations.

Other Stocks to Consider

Investors interested in the Zacks Transportation sector can also consider stocks like C.H. Robinson Worldwide, Inc. (CHRW - Free Report) , GATX Corporation (GATX - Free Report) and Golar LNG Limited (GLNG - Free Report) .

GATX has a surprise of 40.8%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters.  We are upbeat about GATX's efforts to reward its shareholders despite coronavirus-led woes. This January, GATX raised its quarterly dividend by 4% to 52 cents per share. The hiked dividend highlights GATX's commitment to boost shareholder value as well as underscores its strong financial condition and bright prospects.

Driven by the tailwinds, the stock has risen 4.8% in the past year.  GATX currently carries a Zacks Rank #2.

The long-term expected earnings per share (EPS) (three-to-five years) growth rate for C.H. Robinson is pegged at 9%. Improving freight market conditions are aiding CHRW. In first-quarter 2022, the top line improved 41.8% owing to favorable truckload pricing to customers and handsome profits in ocean freight.

Driven by the positives, the stock has rallied 8% in the past year.  CHRW currently sports a Zacks Rank of 1.

Golar LNG has a surprise of 50%, on average, with its earnings having surpassed the Zacks Consensus Estimate in three of the last four quarters (one miss). Golar LNG is benefiting from improved shipping performance. The shipping unit has been performing well, thus aiding the company’s top line.

Driven by the upsides, the stock has soared 90.8% in the past year.  GLNG currently flaunts a Zacks Rank of 1.