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Southwest Airlines (LUV) Gains But Lags Market: What You Should Know

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Southwest Airlines (LUV) closed at $35.94 in the latest trading session, marking a +0.7% move from the prior day. This move lagged the S&P 500's daily gain of 0.95%. At the same time, the Dow added 0.64%, and the tech-heavy Nasdaq gained 0.12%.

Coming into today, shares of the airline had lost 15.93% in the past month. In that same time, the Transportation sector lost 3.6%, while the S&P 500 lost 3.49%.

Investors will be hoping for strength from Southwest Airlines as it approaches its next earnings release, which is expected to be July 28, 2022. On that day, Southwest Airlines is projected to report earnings of $1.12 per share, which would represent year-over-year growth of 420%.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $2.63 per share and revenue of $24.27 billion. These totals would mark changes of +222.33% and +53.71%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for Southwest Airlines. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 3.82% higher within the past month. Southwest Airlines currently has a Zacks Rank of #1 (Strong Buy).

Investors should also note Southwest Airlines's current valuation metrics, including its Forward P/E ratio of 13.55. This valuation marks a discount compared to its industry's average Forward P/E of 18.2.

Investors should also note that LUV has a PEG ratio of 2.26 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Transportation - Airline was holding an average PEG ratio of 2.26 at yesterday's closing price.

The Transportation - Airline industry is part of the Transportation sector. This group has a Zacks Industry Rank of 182, putting it in the bottom 29% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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