Southwest Airlines (LUV)
NYSE:LUV
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Southwest Airlines
(NYSE:LUV)
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Rating:51Neutral
Price Target:
$40.00
▼(-6.32% Downside)
Action:ReiteratedDate:04/23/26
The score is held back primarily by weak cash conversion (negative free cash flow) and a thin-margin financial profile, despite improving leverage. Technicals are also soft with negative momentum and price below key moving averages. Offsetting factors include a generally positive earnings-call backdrop (turnaround progress, strong unit revenue and cash flow in Q1) and a modest dividend, but valuation remains demanding at a ~50 P/E amid fuel-driven guidance uncertainty.
Positive Factors
Unit revenue & margin expansion
Sustained unit-revenue strength and margin improvement indicate durable pricing power and better yield management across the network. Higher RASM and expanding operating margin create a wider buffer to absorb cost shocks and support reinvestment or capital returns if trends persist.
Negative Factors
Negative free cash flow
Persistent negative FCF means reported earnings are not fully converting to discretionary cash, limiting funding for growth, deleveraging, or sustained buybacks without tapping liquidity. This constrains long-term flexibility if adverse shocks recur or capex stays elevated.
Read all positive and negative factors
Positive Factors
Negative Factors
Unit revenue & margin expansion
Sustained unit-revenue strength and margin improvement indicate durable pricing power and better yield management across the network. Higher RASM and expanding operating margin create a wider buffer to absorb cost shocks and support reinvestment or capital returns if trends persist.
Read all positive factors
Southwest Airlines (LUV) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$19.28B
Dividend Yield1.73%
Average Volume (3M)8.22M
Price to Earnings (P/E)20.6
Beta (1Y)1.15
Revenue Growth4.72%
EPS Growth72.71%
CountryUS
Employees71,506
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)0.45
Shares Outstanding488,773,700
10 Day Avg. Volume7,182,407
30 Day Avg. Volume8,219,553
Financial Highlights & Ratios
PEG Ratio40.99
Price to Book (P/B)2.80
Price to Sales (P/S)0.80
P/FCF Ratio-26.86
Enterprise Value/Market Cap1.15
Enterprise Value/Revenue0.77
Enterprise Value/Gross Profit4.67
Enterprise Value/Ebitda8.14
Forecast
1Y Price Target
$46.67Price Target Upside9.30% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering19
EPS Forecast (FY)2.81
Revenue Forecast (FY)$32.56B
Southwest Airlines Business Overview & Revenue Model
Company Description
Southwest Airlines Co. operates as a passenger airline company that provide scheduled air transportation services in the United States and near-international markets. As of December 31, 2021, the company operated a total fleet of 728 Boeing 737 ai...
How the Company Makes Money
Southwest makes money primarily by selling passenger air travel. The largest revenue stream is passenger revenue, generated from ticket sales across fare products and routes; pricing and total revenue are driven by passenger demand, load factors, ...
Southwest Airlines Key Performance Indicators (KPIs)
Any
Revenue by Segment
Highlights earnings from different business areas, helping to pinpoint which segments drive growth and where there might be vulnerabilities.
Highlights earnings from different business areas, helping to pinpoint which segments drive growth and where there might be vulnerabilities.
Data provided by:
The Fly
The FlySouthwest Airlines Earnings Call Summary
Earnings Call Date:Apr 22, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Jul 23, 2026
Earnings Call Sentiment Positive
The call emphasized substantial execution wins: a clear financial turnaround (positive EPS vs. loss last year), record revenues and unit-revenue strength, strong cash generation, rapid customer adoption of new products, margin expansion, and continued operational reliability. Those positive developments are tempered by a meaningful and volatile fuel cost spike that materially pressures margins and prompted management not to revise full-year EPS guidance; there are also investor questions about certain accounting changes (ATL) and ongoing network adjustments. On balance, the transformation appears to be working and driving durable improvements, but short‑term outlook uncertainty is elevated because of fuel.Positive Updates
Quarterly EPS Turnaround
Q1 EPS of $0.45 vs a year-ago loss of $0.26 (GAAP) and adjusted loss of $0.13, representing a material year-over-year improvement; management notes this result despite a $0.22 EPS fuel headwind in the quarter.
Negative Updates
Significant Fuel Cost Pressure
Fuel prices surprised higher in Q1: actual ~$2.73/gallon vs the $2.40/gallon forecast, increasing fuel expense by ~ $164 million in the quarter; management cites a ~$1.0 billion fuel headwind in Q2 (~10 points of margin) and used a $4.10–$4.15/gal forward curve to set Q2 EPS guidance.
Read all updates
Q1-2026 Updates
Positive
Negative
Quarterly EPS Turnaround
Q1 EPS of $0.45 vs a year-ago loss of $0.26 (GAAP) and adjusted loss of $0.13, representing a material year-over-year improvement; management notes this result despite a $0.22 EPS fuel headwind in the quarter.
Read all positive updates
Company Guidance
Southwest guided to second‑quarter EPS of $0.35–$0.65 using an average fuel assumption of $4.10–$4.15/gal (forward curve as of April 16), and expects Q2 unit revenue growth of 16.5%–18.5% year‑over‑year; Tom said Q2 CASM‑X should rise 3.5%–4% on roughly 0.5% capacity growth at the midpoint. Management left the full‑year adjusted EPS target of $4 unchanged for now but declined to update it given fuel and macro uncertainty, and now expects full‑year capacity growth of approximately 2% (down from prior 2%–3% at the top end). For context they highlighted Q1 results that underpin the outlook: Q1 EPS $0.45, RASM/unit revenue +11.2% YoY, operating margin 4.6% (up 8.1 pts YoY), CASM‑X +2.3% on ASMs +1.5%, operating cash flow $1.4B (+65% YoY), liquidity $4.8B and leverage ~2.2x; operational/product targets include Starlink on ≥300 aircraft by year‑end and ~2/3 of the fleet with in‑seat power, and $1.25B of buybacks YTD with $450M remaining.Southwest Airlines Financial Statement Overview
Summary
Income Statement
62
Positive
Balance Sheet
58
Neutral
Cash Flow
41
Neutral
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 28.88B | 28.06B | 27.48B | 26.09B | 23.81B | 15.79B |
| Gross Profit | 4.75B | 4.89B | 4.46B | 4.22B | 4.75B | 4.12B |
| EBITDA | 2.73B | 2.24B | 2.47B | 2.39B | 2.38B | 3.03B |
| Net Income | 817.00M | 441.00M | 465.00M | 465.00M | 539.00M | 977.00M |
Balance Sheet | ||||||
| Total Assets | 29.36B | 29.06B | 33.75B | 36.49B | 35.37B | 36.32B |
| Cash, Cash Equivalents and Short-Term Investments | 3.33B | 3.23B | 8.72B | 11.47B | 12.29B | 15.50B |
| Total Debt | 6.40B | 5.98B | 8.06B | 9.20B | 9.47B | 12.28B |
| Total Liabilities | 22.48B | 21.08B | 23.40B | 25.97B | 24.68B | 25.91B |
| Stockholders Equity | 6.88B | 7.98B | 10.35B | 10.52B | 10.69B | 10.41B |
Cash Flow | ||||||
| Free Cash Flow | -401.00M | -831.00M | -1.62B | -389.00M | -156.00M | 1.81B |
| Operating Cash Flow | 2.40B | 1.84B | 462.00M | 3.16B | 3.79B | 2.32B |
| Investing Cash Flow | -2.50B | -1.43B | -261.00M | -2.93B | -3.75B | -1.26B |
| Financing Cash Flow | -4.71B | -4.69B | -1.98B | -436.00M | -3.03B | 359.00M |
Southwest Airlines Technical Analysis
Positive
42.70
Price Trends
44.23
Negative
42.59
Positive
37.37
Positive
Market Momentum
-0.37
Negative
56.83
Neutral
68.53
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LUV, the sentiment is Positive. The current price of 42.7 is above the 20-day moving average (MA) of 39.42, below the 50-day MA of 44.23, and above the 200-day MA of 37.37, indicating a neutral trend. The MACD of -0.37 indicates Negative momentum. The RSI at 56.83 is Neutral, neither overbought nor oversold. The STOCH value of 68.53 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for LUV.
Southwest Airlines Risk Analysis
Southwest Airlines disclosed 24 risk factors in its most recent earnings report. Southwest Airlines reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Southwest Airlines Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $44.97B | -37.50 | 23.14% | 0.96% | 5.24% | 20.93% | |
71 Outperform | $30.18B | 10.76 | 24.91% | ― | 4.73% | 1.55% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
51 Neutral | $19.28B | 20.61 | 10.67% | 1.73% | 4.72% | 72.71% | |
50 Neutral | $8.00B | -4.65 | -5.17% | ― | 3.33% | -70.60% | |
47 Neutral | $4.71B | -5.45 | 1.85% | ― | 13.94% | -79.71% | |
46 Neutral | $1.96B | -2.79 | -26.05% | ― | -2.34% | 28.59% |
* Industrials Sector Average
LUV
Southwest Airlines
38.20
11.48
42.96%
ALK
Alaska Air
40.44
-3.26
-7.46%
DAL
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68.20
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64.06%
JBLU
JetBlue Airways
4.94
0.76
18.18%
UAL
United Airlines Holdings
91.90
22.97
33.32%
AAL
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11.68
1.78
17.98%
Southwest Airlines Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Southwest Airlines Adds $500 Million Aircraft-Backed Term Loan
Positive
Mar 12, 2026
On March 11, 2026, Southwest Airlines entered into a new $500 million senior secured term loan facility with BNP Paribas as administrative and collateral agent, fully drawn at closing and maturing on March 11, 2029. The company can prepay the loan...
Executive/Board Changes
Southwest Airlines Announces Upcoming Board of Directors Changes
Neutral
Feb 10, 2026
Southwest Airlines Co. announced that directors C. David Cush and Gregg A. Saretsky submitted their resignations from the company’s Board of Directors on February 9, 2026, with both resignations to take effect on February 23, 2026. The compa...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.