Southwest Airlines Co. (NYSE: LUV) ticked higher in pre-market trading after the airline delivered a Q4 earnings beat. The company reported adjusted earnings of $0.37 per diluted share in the fourth quarter compared to a loss of $0.38 in the same period last year. This exceeded analysts’ estimates of earnings of $0.12 per share.
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The firm generated record Q4 revenues of $6.8 billion, up by 10.5% year-over-year, and surpassed Street estimates of $6.75 billion.
Looking forward, management stated that despite inflationary pressures and planned increases in aircraft maintenance costs, the company is looking at expanding its FY24 operating margin through strategic initiatives, network adjustments, and efficiency gains. Moreover, LUV anticipates a $1.5 billion pre-tax boost to its profit due to double-digit operating revenue growth as a result of these initiatives.
In the first quarter, LUV expects its available seat miles (ASMs), or its capacity, to be up by around 10%. At the same time, its operating revenue per available seat mile (RASM) is projected to increase in the range of 2.5% to 4.5% year-over-year. In FY24, Southwest expects its seat capacity to increase by around 6%, while economic fuel costs will likely range from $2.55 to $2.65 per gallon.
Is LUV a Good Buy Now?
Analysts remain sidelined about LUV stock with a Hold consensus rating based on one Buy, seven Holds, and four Sells. LUV has slid by more than 10% over the past year, and the average LUV price target of $26.45 implies a downside potential of around 15% at current levels.
