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Low cost carrier Southwest Airlines Co. (LUV - Free Report) reported mixed results for the second quarter of 2016, missing on earnings but beating on revenues. The carrier’s earnings per share (on an adjusted basis) of $1.19 fell short of the Zacks Consensus Estimate of $1.22. Earnings, however, increased 15.5% on a year-over-year basis.
Southwest Airlines reported revenues of $5,384 million which edged past the Zacks Consensus Estimate of $5,372 million. Revenues increased 5.3% year over year. Passenger revenues accounted for the bulk (91.1%) of the top line. Passenger revenues improved 1.1% on a year-over-year basis.
Operating Statistics
Airline traffic, measured revenue passenger miles, increased 6% year over year to 32.71 billion in the quarter under review. Capacity or available seat miles increased 4.8% to 38.22 billion, while load factor (percentage of seats filled by passengers) came in at 85.6% compared with 84.6% in the year-ago quarter as traffic growth outweighed capacity expansion. Meanwhile, passenger revenue per available seat mile (PRASM) fell 3.5% year over year to 12.83 cents. In the reported quarter, revenue per available seat mile (RASM) was 14.09 cents, up 0.6% year over year.
Operating Expenses & Income
In the second quarter of 2016, operating income came in at $1.3 billion, up 18% year over year mainly. Total adjusted operating expenses increased 3.9% year over year to $4,117 million. Fuel price (economic) stood at $1.81 per gallon, down from $2.02 recorded a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, increased 2.1% year over year to 7.79 cents.
At the end of second-quarter 2016, Southwest Airlines had $3,415 million in cash and short-term investments compared with $3,051 million at the end of 2015. In the reported quarter, the company had long-term debt (less current maturities) of $2,391 million compared with $2,541 million at the end of 2015. The carrier generated free cash flow of $649 million in the quarter and returned $763 million to shareholders through buybacks/dividend payments.
Q3 Guidance
Southwest Airlines anticipates RASM decline in the band of 3% to 4% in the third quarter of 2016. Fuel costs (economic) are projected to be $2.05 per gallon.
Zacks Rank & Key Picks
Southwest Airlines currently carries a Zacks Rank #5 (Strong Sell). Better-ranked airline stocks include Cathay Pacific Airways (CPCAY - Free Report) with a Zacks Rank #1 (Strong Buy) and ANA Holdings (ALNPY - Free Report) and LATAM Holdings with a Zacks Rank #2 (Buy).
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Southwest Airlines (LUV) Q2 Earnings Miss, Revenues Beat
Low cost carrier Southwest Airlines Co. (LUV - Free Report) reported mixed results for the second quarter of 2016, missing on earnings but beating on revenues. The carrier’s earnings per share (on an adjusted basis) of $1.19 fell short of the Zacks Consensus Estimate of $1.22. Earnings, however, increased 15.5% on a year-over-year basis.
Southwest Airlines reported revenues of $5,384 million which edged past the Zacks Consensus Estimate of $5,372 million. Revenues increased 5.3% year over year. Passenger revenues accounted for the bulk (91.1%) of the top line. Passenger revenues improved 1.1% on a year-over-year basis.
Operating Statistics
Airline traffic, measured revenue passenger miles, increased 6% year over year to 32.71 billion in the quarter under review. Capacity or available seat miles increased 4.8% to 38.22 billion, while load factor (percentage of seats filled by passengers) came in at 85.6% compared with 84.6% in the year-ago quarter as traffic growth outweighed capacity expansion. Meanwhile, passenger revenue per available seat mile (PRASM) fell 3.5% year over year to 12.83 cents. In the reported quarter, revenue per available seat mile (RASM) was 14.09 cents, up 0.6% year over year.
Operating Expenses & Income
In the second quarter of 2016, operating income came in at $1.3 billion, up 18% year over year mainly. Total adjusted operating expenses increased 3.9% year over year to $4,117 million. Fuel price (economic) stood at $1.81 per gallon, down from $2.02 recorded a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, increased 2.1% year over year to 7.79 cents.
SOUTHWEST AIR Price, Consensus and EPS Surprise
SOUTHWEST AIR Price, Consensus and EPS Surprise | SOUTHWEST AIR Quote
Liquidity
At the end of second-quarter 2016, Southwest Airlines had $3,415 million in cash and short-term investments compared with $3,051 million at the end of 2015. In the reported quarter, the company had long-term debt (less current maturities) of $2,391 million compared with $2,541 million at the end of 2015. The carrier generated free cash flow of $649 million in the quarter and returned $763 million to shareholders through buybacks/dividend payments.
Q3 Guidance
Southwest Airlines anticipates RASM decline in the band of 3% to 4% in the third quarter of 2016. Fuel costs (economic) are projected to be $2.05 per gallon.
Zacks Rank & Key Picks
Southwest Airlines currently carries a Zacks Rank #5 (Strong Sell). Better-ranked airline stocks include Cathay Pacific Airways (CPCAY - Free Report) with a Zacks Rank #1 (Strong Buy) and ANA Holdings (ALNPY - Free Report) and LATAM Holdings with a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>