A month has gone by since the last earnings report for Southwest Airlines (LUV Quick QuoteLUV - Free Report) . Shares have added about 8% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Southwest due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Southwest Airlines Co. before we dive into how investors and analysts have reacted as of late.

Southwest Airlines Q1 Earnings Meet Estimates

Southwest Airlines reported first-quarter of 2026 earnings per share of 45 cents, in line with the Zacks Consensus Estimate and improving from a loss of 13 cents in the year-ago quarter. The quarter reflected solid execution as the carrier’s commercial and cost initiatives began showing up more clearly in reported results.

Operating revenues of $7.24 billion edged past the Zacks Consensus Estimate of $7.21 billion for a 0.4% surprise and rose 12.8% year over year. Demand for the company’s new product offerings helped push passenger and unit revenues to first-quarter records, while profitability and cash generation moved meaningfully higher. These results were achieved despite significantly higher fuel costs.

LUV Passenger Revenue Leads a Broad Top-Line Lift—Change the sub head

LUV’s revenue gains were driven primarily by passenger revenues (which accounted for 90.9% of the top line), which rose 13.4% year over year to $6.59 billion in first-quarter 2026.

The remainder of the revenue mix also moved higher. Freight revenue increased 7.3% year over year to $44 million, while other operating revenues rose 6.6% year over year to $614 million. The company also cited strengthening managed business revenue performance, including a 16% increase for the quarter and a 25% jump in March, reflecting momentum in higher-yielding demand channels.

LUV’s Margin Expansion Shows Progress in the Plan

Southwest Airlines produced a sharp improvement in profitability in the first quarter of 2026, supported by the combination of higher revenues and disciplined expense growth. Operating income came in at $330 million versus an operating loss of $223 million in the year-ago quarter, translating into an operating margin of 4.6%, an 8.1-point improvement year over year.

Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses and special items grew 2.3% year over year.

Aircraft fuel costs per gallon increased to $2.73 from $2.49.

LUV’s Unit Revenue Trends Outpace Modest Capacity Growth

LUV’s operating statistics in the first quarter of 2026 point to improving revenue productivity. Unit revenue, measured by operating revenue per available seat mile (RASM), increased 11.2% year over year to 17.24 cents, while passenger revenue per available seat mile (PRASM) rose 11.8% to 15.68 cents. Those gains came with only modest capacity growth, helping the company generate stronger revenue on each unit of capacity flown.

Capacity, measured in available seat miles, increased 1.5% year over year to 42.05 billion. Demand indicators were also positive. Airline traffic, measured in revenue passenger miles, increased 1.7% to 31.15 billion. Since traffic outpaced capacity expansion, the load factor (percentage of seat occupancy) improved to 74.1% from 73.9% in the prior-year period. Our estimate for load factor is pegged at 78.9%.

Pricing metrics also strengthened, with average passenger fare rising 16.6% year over year to $225.93, highlighting improved yield as the carrier rolled out commercial initiatives.

Southwest Airlines' Liquidity and Cash Flow Improve

Southwest Airlines ended the first quarter with cash and cash equivalents of $3.33 billion, up from $3.23 billion at the end of the prior quarter. As of March 31, 2026, the company had long-term debt (less current maturities) of $4.53 billion compared with $4.57 billion at the end of the prior quarter.

Southwest Airlines' cash generation accelerated in the first quarter of fiscal 2026. Net cash provided by operating activities was $1.42 billion, up from $860 million in the year-ago quarter, reflecting the earnings improvement and working-capital benefits. The company reinvested in the business, with capital expenditures of $630 million during the quarter, and generated $192 million of proceeds from sales of property and equipment.

The company continued returning capital to shareholders, repurchasing $1.25 billion of common stock and paying $93 million in dividends in the reported quarter.

LUV Outlook Targets Higher Unit Revenue and Controlled Costs

For second-quarter 2026, LUV expects adjusted earnings per share in the range of 35 cents to 65 cents. Capacity, measured by available seat miles, is expected to be flat to up 1.0% year over year, while unit revenues (RASM) are projected to increase in the range of 16.5% to 18.5% from the prior-year period. Second-quarter 2026 CASM-X is anticipated to be between 3.5% and 4.0% year over year, which includes an expected 1.2-point impact from the removal of six seats from the Boeing 737-700 fleet to enable extra legroom seating.

Fuel remains a key swing factor in near-term results. For second-quarter 2026, the company assumes fuel cost per gallon to be between $4.10 and $4.15 based on the forward curve referenced in the release. Management also reiterated that, given ongoing macroeconomic uncertainty, updating the company’s full-year adjusted earnings per share target of $4.00 would not be productive at this time, noting that achieving that outcome would require lower fuel prices and or stronger revenue performance to offset higher fuel expense.

LUV anticipates 2026 net capital spending in the range of $3.0 billion to $3.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in estimates review.

The consensus estimate has shifted -20.45% due to these changes.

VGM Scores

Currently, Southwest has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of A on the value side, putting it in the top quintile for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Southwest has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Southwest belongs to the Zacks Transportation - Airline industry. Another stock from the same industry, United Airlines (UAL Quick QuoteUAL - Free Report) , has gained 9.2% over the past month. More than a month has passed since the company reported results for the quarter ended March 2026.

United reported revenues of $14.61 billion in the last reported quarter, representing a year-over-year change of +10.6%. EPS of $1.19 for the same period compares with $0.91 a year ago.

For the current quarter, United is expected to post earnings of $1.90 per share, indicating a change of -50.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +18.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for United. Also, the stock has a VGM Score of A.