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Southwest Airlines has missed the Zacks Consensus Estimate in two of the preceding four quarters, the average miss being 298.58%. However, the company has outperformed the Zacks Consensus Estimate in one quarter and met the mark in the remaining quarter. The Zacks Consensus Estimate for fourth-quarter earnings has been revised 71% downward over the past 90 days.
Let’s see how things have shaped up for Southwest Airlines this earnings season.
Q4 Expectations
The Zacks Consensus Estimate for LUV’s fourth-quarter 2023 revenues is pegged at $6.74 billion, indicating 9.23% year-over-year growth. The top line is likely to have been aided by favorable air travel demand and yield. The company has witnessed solid leisure demand with record revenues during the Thanksgiving holiday period and better-than-expected close-in bookings, including managed business bookings, during November and December.
Backed by this uptick, Southwest Airlines now expects fourth-quarter unit revenues to improve to the better end of its previous guidance range. LUV continues to expect record fourth-quarter operating revenues and passengers.
Revenue per available seat mile (RASM) for the December quarter is now expected to decline 9-10% (prior view: 9-11%). LUV continues to expect its fourth-quarter available seat miles (ASMs or capacity) to improve 21% from the year-ago period.
Notably, the record-breaking traffic during the Thanksgiving period has provided a much-needed boost to the airline stock after a few tough months due to headwinds like high labor and fuel costs and a slowdown in domestic air travel demand.
On the flip side, escalating fuel prices represent a concern. Notably, LUV has raised its fourth-quarter economic fuel costs per gallon guidance between $3.00 and $3.10 (prior view: $2.90 to $3.00).
Apart from an increase in fuel costs, a rise in labor and airport costs is also likely to have dented bottom-line growth, resulting in a spike in operating expenses. Due to an increase in labor and airport costs, as well as lower productivity levels, LUV continues to expect the cost per available seat mile (CASM, excluding fuel, oil and profit-sharing expenses, and special items) to decrease 16-19% in the fourth quarter from the comparable period in 2022. Interest expenses are still expected to be $63 million in the fourth 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 -24.71% and a Zacks Rank #3.
Southwest Airlines reported third-quarter 2023 earnings of 38 cents per share, which came in line with the Zacks Consensus Estimate but declined 24% on a year-over-year basis. Revenues of $6,525 million lagged the Zacks Consensus Estimate of $6,570.3 million but improved 4.9% 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 on their fourth-quarter 2023 earnings:
The Zacks Consensus Estimate for AAL’s fourth-quarter 2023 earnings has been revised upward by more than 100% in the past 90 days. AAL delivered a trailing four-quarter earnings surprise of 23.83%, on average.
Shares of AAL have gained 21% in the past three months.
Copa Holdings, S.A.(CPA - Free Report) has an Earnings ESP of +1.47% and a Zacks Rank #1. CPA will release results on Feb 7.
The Zacks Consensus Estimate for CPA’s fourth-quarter 2023 earnings has been revised upward by 5.1% in the past 90 days. CPA delivered a trailing four-quarter earnings surprise of 16.81%, on average.
Shares of CPA have gained 10.2% in the past three months.
Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation (WAB - Free Report) , has an Earnings ESP of +0.85% and a Zacks Rank #2. WAB will release results on Feb 14.
WAB has an expected earnings growth rate of 20.77% for fourth-quarter 2023. WAB delivered a trailing four-quarter earnings surprise of 7.11%, on average.
The Zacks Consensus Estimate for WAB’s fourth-quarter 2023 earnings has improved 3.3% over the past 90 days. Shares of WAB have gained 29.6% in the past three months.
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What's in Store for Southwest Airlines (LUV) in Q4 Earnings?
Southwest Airlines Co. (LUV - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 25.
Southwest Airlines has missed the Zacks Consensus Estimate in two of the preceding four quarters, the average miss being 298.58%. However, the company has outperformed the Zacks Consensus Estimate in one quarter and met the mark in the remaining quarter. The Zacks Consensus Estimate for fourth-quarter earnings has been revised 71% downward over the past 90 days.
Let’s see how things have shaped up for Southwest Airlines this earnings season.
Q4 Expectations
The Zacks Consensus Estimate for LUV’s fourth-quarter 2023 revenues is pegged at $6.74 billion, indicating 9.23% year-over-year growth. The top line is likely to have been aided by favorable air travel demand and yield. The company has witnessed solid leisure demand with record revenues during the Thanksgiving holiday period and better-than-expected close-in bookings, including managed business bookings, during November and December.
Backed by this uptick, Southwest Airlines now expects fourth-quarter unit revenues to improve to the better end of its previous guidance range. LUV continues to expect record fourth-quarter operating revenues and passengers.
Revenue per available seat mile (RASM) for the December quarter is now expected to decline 9-10% (prior view: 9-11%). LUV continues to expect its fourth-quarter available seat miles (ASMs or capacity) to improve 21% from the year-ago period.
Notably, the record-breaking traffic during the Thanksgiving period has provided a much-needed boost to the airline stock after a few tough months due to headwinds like high labor and fuel costs and a slowdown in domestic air travel demand.
On the flip side, escalating fuel prices represent a concern. Notably, LUV has raised its fourth-quarter economic fuel costs per gallon guidance between $3.00 and $3.10 (prior view: $2.90 to $3.00).
Apart from an increase in fuel costs, a rise in labor and airport costs is also likely to have dented bottom-line growth, resulting in a spike in operating expenses. Due to an increase in labor and airport costs, as well as lower productivity levels, LUV continues to expect the cost per available seat mile (CASM, excluding fuel, oil and profit-sharing expenses, and special items) to decrease 16-19% in the fourth quarter from the comparable period in 2022. Interest expenses are still expected to be $63 million in the fourth 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 -24.71% and a Zacks Rank #3.
Southwest Airlines Co. Price and EPS Surprise
Southwest Airlines Co. price-eps-surprise | Southwest Airlines Co. Quote
Highlights of Q3
Southwest Airlines reported third-quarter 2023 earnings of 38 cents per share, which came in line with the Zacks Consensus Estimate but declined 24% on a year-over-year basis. Revenues of $6,525 million lagged the Zacks Consensus Estimate of $6,570.3 million but improved 4.9% 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 on their fourth-quarter 2023 earnings:
American Airlines Group Inc. (AAL - Free Report) has an Earnings ESP of +43.10% and a Zacks Rank #2. AAL will release results on Jan 25. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AAL’s fourth-quarter 2023 earnings has been revised upward by more than 100% in the past 90 days. AAL delivered a trailing four-quarter earnings surprise of 23.83%, on average.
Shares of AAL have gained 21% in the past three months.
Copa Holdings, S.A.(CPA - Free Report) has an Earnings ESP of +1.47% and a Zacks Rank #1. CPA will release results on Feb 7.
The Zacks Consensus Estimate for CPA’s fourth-quarter 2023 earnings has been revised upward by 5.1% in the past 90 days. CPA delivered a trailing four-quarter earnings surprise of 16.81%, on average.
Shares of CPA have gained 10.2% in the past three months.
Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation (WAB - Free Report) , has an Earnings ESP of +0.85% and a Zacks Rank #2. WAB will release results on Feb 14.
WAB has an expected earnings growth rate of 20.77% for fourth-quarter 2023. WAB delivered a trailing four-quarter earnings surprise of 7.11%, on average.
The Zacks Consensus Estimate for WAB’s fourth-quarter 2023 earnings has improved 3.3% over the past 90 days. Shares of WAB have gained 29.6% in the past three months.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.