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What's in the Offing for Southwest (LUV) in Q3 Earnings?

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·3 min read
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Southwest Airlines Co. LUV is scheduled to report third-quarter 2021 results on Oct 21.

The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in three of the trailing four quarters and missing once.

Let’s see how things are shaping up for Southwest this earnings season:

Factors to Note

With uptick in air-travel demand, Southwest’s passenger revenues are expected to reflect sequential improvement. The Zacks Consensus Estimate for third-quarter passenger revenues indicates a 16.6% rise from the second-quarter reported number.

However, with a spike in coronavirus cases induced by the Delta variant, the company witnessed softness in bookings. This might have dented the airline’s top line in the soon-to-be-reported quarter.

Apart from Delta-variant woes, Hurricane Ida disrupted the airline’s operations in the third quarter. The carrier is expected to have canceled nearly 2,700 flights during the quarter, which is likely to have affected its top line.

With air-travel demand continuing to be below the pre-pandemic levels despite showing improvement, Southwest expects operating revenues to decrease 18-20% for the third quarter from the comparable period in 2019.

The carrier’s bottom line is expected to have been hurt by increase in fuel costs, thanks to a spike in oil prices. The Zacks Consensus Estimate for fuel costs per gallon, including fuel tax (economic), suggests an 8.9% increase from the second-quarter reported number. The airline estimates economic fuel costs per gallon in the range of $2.05-$2.15 for the third quarter. The company reported fuel cost per gallon (inclusive of fuel tax: economic) of $1.92 in the second quarter.

Southwest Airlines Co. Price and EPS Surprise

Southwest Airlines Co. Price and EPS Surprise
Southwest Airlines Co. Price and EPS Surprise

Southwest Airlines Co. price-eps-surprise | Southwest Airlines Co. Quote

Earnings Whispers

The proven Zacks model does not conclusively predict an earnings beat for Southwest 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. However, this is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Southwest has an Earnings ESP of +13.36% as the Most Accurate Estimate is pegged at a loss of 23 cents, while the Zacks Consensus Estimate is poised at 27 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Southwest carries a Zacks Rank #4 (Sell).

Highlights of Q2 Earnings

In the last-reported quarter, the company delivered a negative earnings surprise of 66.7% with wider-than-expected loss. However, Operating revenues outperformed the Zacks Consensus Estimate and also jumped more than 200% year over year with passenger revenues improving significantly.

Stocks to Consider

Investors interested in the broader Transportation sector may consider C.H. Robinson Worldwide CHRW, Knight-Swift Transportation Holdings KNX and Ryder System R, as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

C.H. Robinson has an Earnings ESP of +1.06% and a Zacks Rank #2. The company will report third-quarter 2021 results on Oct 26.

Knight-Swift has an Earnings ESP of +1.33% and a Zacks Rank #2. The company is scheduled to report third-quarter 2021 earnings numbers on Oct 20.

Ryder has an Earnings ESP of +4.73% and a Zacks Rank #1. The company will release third-quarter 2021 financial numbers on Oct 27.


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

Ryder System, Inc. (R) : Free Stock Analysis Report

C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report

KnightSwift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report

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