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Southwest Airlines has missed the Zacks Consensus Estimate in one of the preceding four quarters, the average miss being 281.93%. However, the company has outperformed the Zacks Consensus Estimate in the remaining three quarters.
Let’s see how things have shaped up for Southwest Airlines this earnings season.
Q1 Expectations
The Zacks Consensus Estimate for LUV’s first-quarter 2023 revenues is pegged at $5.74 billion, indicating 22.28% year-over-year growth. The top line is likely to have been aided by a solid recovery in domestic and leisure air-travel demand and an improvement in passenger revenues.
For first-quarter 2023, operating revenues are now expected to rise in the 21-23% range compared with 20-24% year-over-year growth estimated earlier. Available seat miles are still estimated to improve 10% from the year-ago reported figure.
However, LUV continues to expect a negative revenue impact in the $300-$350 million band in first-quarter 2023, primarily limited to January and February, due to operational disruptions in December 2022.
Southwest Airlines’ management expects to incur a loss in the first quarter mainly due to high costs. Economic fuel costs per gallon are now expected to be in the $3.1-$3.2 range (earlier expectation: $3.25-$3.35). LUV now expects cost per available seat miles, excluding fuel, oil and profit-sharing expenses, and special items, to increase 5.5-6.5% in the first quarter from the comparable period in 2022 (earlier expectation was in the 2-4% range). Approximately 50% of the increase is due to the rise in expenses pertaining to the December 2022 operational disruptions. Interest expenses are still expected to be $65 million in the first quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Southwest Airlines 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Southwest Airlines has an Earnings ESP of -14.69% and a Zacks Rank #3.
Highlights of Q4
Southwest Airlines reported fourth-quarter 2022 loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 3 cents. In the year-ago reported quarter, LUV had reported earnings of 14 cents per share.
Operational disruptions in late December resulted in more than 16,700 flight cancelations. As a result, LUV had to bear a fourth-quarter pre-tax negative impact of $800 million (or almost $620 million on an after-tax basis), which led to a fourth-quarter 2022 net loss.
Revenues of $6,172 million lagged the Zacks Consensus Estimate of $6,270.9 million but improved 22.2% year over year.
Stocks to Consider
Here are a few stocks from the broader Zacks Transportation sector that investors may consider, as our model shows that these have the right combination of elements to beat their first-quarter 2023 earnings.
Copa Holdings has an expected earnings growth rate of more than 100% for the first quarter. CPA delivered a trailing four-quarter earnings surprise of 33.35%, on average.
The Zacks Consensus Estimate for CPA’s first-quarter earnings has improved 6.1% over the past 60 days.
American Airlines (AAL - Free Report) has an Earnings ESP of +85.71% and a Zacks Rank #2. AAL will release results on Apr 27.
AAL has an expected earnings growth rate of more than 100% for the first quarter. AAL delivered a trailing four-quarter earnings surprise of 7.79%, on average.
The Zacks Consensus Estimate for AAL’s first-quarter earnings has improved more than 100% over the past 60 days.
Canadian National Railway Company (CNI - Free Report) has an Earnings ESP of +0.86% and a Zacks Rank #3. CNI will release results on Apr 24.
CNI has an expected earnings growth rate of 21.15% for the first quarter. CNI delivered a trailing four-quarter earnings surprise of 3.46%, on average.
CNI has a long-term earnings growth rate of 7.72%.
Image: Bigstock
What's in Store for Southwest Airlines (LUV) in Q1 Earnings?
Southwest Airlines Co. (LUV - Free Report) is scheduled to report first-quarter 2023 results on Apr 26, after market close.
Southwest Airlines has missed the Zacks Consensus Estimate in one of the preceding four quarters, the average miss being 281.93%. However, the company has outperformed the Zacks Consensus Estimate in the remaining three quarters.
Let’s see how things have shaped up for Southwest Airlines this earnings season.
Q1 Expectations
The Zacks Consensus Estimate for LUV’s first-quarter 2023 revenues is pegged at $5.74 billion, indicating 22.28% year-over-year growth. The top line is likely to have been aided by a solid recovery in domestic and leisure air-travel demand and an improvement in passenger revenues.
For first-quarter 2023, operating revenues are now expected to rise in the 21-23% range compared with 20-24% year-over-year growth estimated earlier. Available seat miles are still estimated to improve 10% from the year-ago reported figure.
However, LUV continues to expect a negative revenue impact in the $300-$350 million band in first-quarter 2023, primarily limited to January and February, due to operational disruptions in December 2022.
Southwest Airlines’ management expects to incur a loss in the first quarter mainly due to high costs. Economic fuel costs per gallon are now expected to be in the $3.1-$3.2 range (earlier expectation: $3.25-$3.35). LUV now expects cost per available seat miles, excluding fuel, oil and profit-sharing expenses, and special items, to increase 5.5-6.5% in the first quarter from the comparable period in 2022 (earlier expectation was in the 2-4% range). Approximately 50% of the increase is due to the rise in expenses pertaining to the December 2022 operational disruptions. Interest expenses are still expected to be $65 million in the first quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Southwest Airlines 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Southwest Airlines has an Earnings ESP of -14.69% and a Zacks Rank #3.
Highlights of Q4
Southwest Airlines reported fourth-quarter 2022 loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 3 cents. In the year-ago reported quarter, LUV had reported earnings of 14 cents per share.
Operational disruptions in late December resulted in more than 16,700 flight cancelations. As a result, LUV had to bear a fourth-quarter pre-tax negative impact of $800 million (or almost $620 million on an after-tax basis), which led to a fourth-quarter 2022 net loss.
Revenues of $6,172 million lagged the Zacks Consensus Estimate of $6,270.9 million but improved 22.2% year over year.
Stocks to Consider
Here are a few stocks from the broader Zacks Transportation sector that investors may consider, as our model shows that these have the right combination of elements to beat their first-quarter 2023 earnings.
Copa Holdings, S.A. (CPA - Free Report) has an Earnings ESP of +19.57% and a Zacks Rank #1. CPA will release results on May 10. You can see the complete list of today’s Zacks #1 Rank stocks here.
Copa Holdings has an expected earnings growth rate of more than 100% for the first quarter. CPA delivered a trailing four-quarter earnings surprise of 33.35%, on average.
The Zacks Consensus Estimate for CPA’s first-quarter earnings has improved 6.1% over the past 60 days.
American Airlines (AAL - Free Report) has an Earnings ESP of +85.71% and a Zacks Rank #2. AAL will release results on Apr 27.
AAL has an expected earnings growth rate of more than 100% for the first quarter. AAL delivered a trailing four-quarter earnings surprise of 7.79%, on average.
The Zacks Consensus Estimate for AAL’s first-quarter earnings has improved more than 100% over the past 60 days.
Canadian National Railway Company (CNI - Free Report) has an Earnings ESP of +0.86% and a Zacks Rank #3. CNI will release results on Apr 24.
CNI has an expected earnings growth rate of 21.15% for the first quarter. CNI delivered a trailing four-quarter earnings surprise of 3.46%, on average.
CNI has a long-term earnings growth rate of 7.72%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.