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Southwest (LUV) Improves Q4 Guidance, Expects to Reap Profits

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Southwest Airlines LUV improved its outlook for the fourth quarter of 2021 owing to a strong Thanksgiving holiday travel period, higher fares and benefits from co-brand credit card agreement with Chase.

LUV now expects to be profitable in the fourth quarter. During third-quarter 2021 earnings call in October, the company had said that it did not expect to reap profits in the fourth quarter due to spike in fuel prices and costs associated with ramp up in operations. Amid Omicron-variant-induced fears of further weakening of air-travel demand, LUV’s bullish forecast for the fourth quarter of 2021 offers some respite.

Southwest estimates operating revenues to decline 10-15% in the current quarter from the fourth quarter of 2019. Previously, the same was predicted to decrease 15-25%. Load factor is forecast to be in the range of 80-85%. Capacity, measured in available seat miles (ASMs), is expected to fall about 8% in the ongoing quarter from the comparable period in 2019. LUV estimates fuel cost per gallon in the band of $2.15-$2.25 (earlier forecast: $2.25-$2.35) in the fourth quarter. Adjusted cost per ASM, excluding fuel, is still expected to increase 8-12% from the fourth quarter of 2019.

Southwest Airlines Co. Price

Southwest Airlines Co. Price
Southwest Airlines Co. Price

Southwest Airlines Co. price | Southwest Airlines Co. Quote


Southwest’s bookings for leisure travel “continue to come in above expectations for December.” The airline expects its managed business revenues to decline 55-60% in December from the 2019 levels.

LUV expects to generate strong profits and margins in 2022. It expects capacity to decline approximately 6% in the first quarter of 2022 from the comparable period in 2019. The same is predicted to either decline up to 3% or increase up to 2% in 2022. Fuel cost per gallon is estimated in the range of $2.05-$2.15 for the first quarter of 2022 as well as the full year. Adjusted cost per ASM, excluding fuel, is predicted to rise 10-14% in the first quarter from the comparable period in 2019. The same is expected to climb 8-12% for the full year.

Zacks Rank & Key Picks

Southwest carries a Zacks Rank #3 (Hold).

Here are some better-ranked stocks within the broader Transportation sector:

Expeditors International of Washington EXPD sports a Zacks Rank #1 (Strong Buy). The company has a stellar earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 29.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Expeditors have appreciated more than 36% so far this year.

Schneider National SNDR carries a Zacks Rank #2 (Buy). The company’s earnings have outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 21%.

Shares of Schneider National have rallied more than 22% so far this year.

Landstar System LSTR carries a Zacks Rank #2. The company’s earnings have trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 11.4%.

Shares of Landstar have gained nearly 30% so far this year.


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Southwest Airlines Co. (LUV) : Free Stock Analysis Report

Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report

Landstar System, Inc. (LSTR) : Free Stock Analysis Report

Schneider National, Inc. (SNDR) : Free Stock Analysis Report

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