Southwest Airlines (LUV) AI Stock Analysis

• Market Cap: $21.34B
• Dividend Yield: 1.75%
• Average Volume (3M): 9.49M
• Price to Earnings (P/E): 62.9
• Beta (1Y): 0.93
• Revenue Growth: 0.65%
• EPS Growth: N/A
• Country: US
• Employees: 71,506
• Sector: Industrials
• Sector Strength: 72
• Industry: Airlines, Airports & Air Services
• EPS (TTM): 0.11
• Shares Outstanding: 517,155,100
• 10 Day Avg. Volume: 15,081,900
• 30 Day Avg. Volume: 9,492,304
• PEG Ratio: 0.00
• Price to Book (P/B): 1.94
• Price to Sales (P/S): 0.73
• P/FCF Ratio: -12.43
• Enterprise Value/Market Cap: 0.95
• Enterprise Value/Revenue: 0.73
• Enterprise Value/Gross Profit: 4.38
• Enterprise Value/Ebitda: 9.13
• 1Y Price Target: $40.43
• Price Target Upside: -2.01% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 14
• EPS Forecast (FY): 0.97
• Revenue Forecast (FY): $28.14B

• Rating: 66 Neutral
• Price Target: $41.00 ▼(-0.63% Downside)

Southwest Airlines' stock score reflects a recovery trajectory with strong technical momentum and positive earnings call sentiment. However, valuation concerns and financial performance challenges, particularly in profitability and cash flow, weigh on the overall score.

Positive Factors

Revenue Growth

Record revenue growth indicates strong market demand and effective execution of strategic initiatives, supporting long-term business expansion.

Operational Improvements

Improved customer satisfaction from operational changes can enhance brand loyalty and drive repeat business, strengthening competitive position.

Strategic Partnerships

Strategic partnerships enhance customer experience and loyalty, potentially increasing customer retention and long-term revenue streams.

Negative Factors

Profitability Challenges

Low profitability margins indicate challenges in converting revenue into profit, which may impact long-term financial sustainability.

Cash Flow Issues

Negative free cash flow suggests ongoing liquidity issues, potentially limiting the company's ability to invest in growth opportunities.

Revised EBIT Expectations

Lowered EBIT expectations due to external factors like fuel costs and government shutdown may signal future earnings volatility and operational risks.

Southwest Airlines Business Overview & Revenue Model

Company Description

Southwest Airlines Co. (LUV) is a major American airline that operates in the airline industry, primarily focusing on providing low-cost air travel services. Founded in 1967, the company is headquartered in Dallas, Texas, and is known for its no-frills, customer-centric approach to flying. Southwest Airlines offers point-to-point flights, primarily serving domestic routes, while also providing a limited number of international services. Its core products include passenger air transportation, with a focus on affordable fares, flexible ticketing options, and a unique rapid rewards loyalty program.

How the Company Makes Money

Southwest Airlines generates revenue primarily through the sale of passenger tickets, which constitutes the bulk of its earnings. The airline employs a low-cost carrier business model, focusing on short-haul flights that allow for quick turnaround times and high aircraft utilization. Additional revenue streams include ancillary services such as checked baggage fees, in-flight services, and priority boarding. The company also benefits from partnerships with travel-related businesses, including hotel chains and car rental services, which further enhance its revenue through cross-promotional opportunities. Additionally, its loyalty program, Rapid Rewards, drives repeat business and contributes to customer retention, thus solidifying its revenue base.

Southwest Airlines Financial Statement Overview

Summary

Southwest Airlines shows moderate revenue growth and improved gross profit margins, indicating recovery. However, low net profit margins and negative free cash flow highlight profitability and cash management challenges. The balance sheet is healthier with a better debt profile, but further improvements in cash flow management are needed.

Income Statement

Southwest Airlines shows a moderate revenue growth rate of 28.8% in the TTM, indicating recovery and expansion. However, the net profit margin is relatively low at 1.38%, suggesting limited profitability. The gross profit margin has improved to 24.99%, reflecting better cost management. EBIT and EBITDA margins are modest, indicating room for operational efficiency improvements.

Balance Sheet

The debt-to-equity ratio has improved to 0.68 in the TTM, indicating a more balanced capital structure. Return on equity is stable at 4.27%, showing consistent shareholder returns. The equity ratio stands at 27.45%, suggesting a solid equity base relative to total assets, although there is potential for further strengthening.

Cash Flow

Operating cash flow is positive, but the free cash flow remains negative, highlighting cash management challenges. The operating cash flow to net income ratio is 0.18, indicating moderate cash generation relative to earnings. The negative free cash flow growth rate and free cash flow to net income ratio suggest ongoing cash flow pressures.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	27.55B	27.48B	26.09B	23.81B	15.79B	9.05B
Gross Profit	4.61B	4.46B	4.22B	4.75B	4.12B	-1.89B
EBITDA	2.21B	2.47B	2.39B	2.38B	3.03B	-2.69B
Net Income	379.00M	465.00M	465.00M	539.00M	977.00M	-3.07B
Balance Sheet
Total Assets	28.31B	33.75B	36.49B	35.37B	36.32B	34.59B
Cash, Cash Equivalents and Short-Term Investments	3.02B	8.72B	11.47B	12.29B	15.50B	13.33B
Total Debt	5.26B	8.06B	9.20B	9.47B	12.28B	12.20B
Total Liabilities	20.54B	23.40B	25.97B	24.68B	25.91B	25.71B
Stockholders Equity	7.78B	10.35B	10.52B	10.69B	10.41B	8.88B
Cash Flow
Free Cash Flow	-250.00M	-1.62B	-389.00M	-156.00M	1.81B	-1.64B
Operating Cash Flow	2.02B	462.00M	3.16B	3.79B	2.32B	-1.13B
Investing Cash Flow	-614.00M	-261.00M	-2.93B	-3.75B	-1.26B	-16.00M
Financing Cash Flow	-7.01B	-1.98B	-436.00M	-3.03B	359.00M	9.66B

Southwest Airlines Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 41.26
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: 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 41.26 is above the 20-day moving average (MA) of 37.73, above the 50-day MA of 34.38, and above the 200-day MA of 32.12, indicating a bullish trend. The MACD of 2.27 indicates Negative momentum. The RSI at 73.54 is Negative, neither overbought nor oversold. The STOCH value of 61.75 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for LUV.

Southwest Airlines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DAL	80 Outperform	$46.40B	10.02	28.52%	0.95%	4.33%	-1.58%
UAL	74 Outperform	$36.90B	11.42	25.59%	―	4.24%	20.29%
LUV	66 Neutral	$21.34B	62.88	4.22%	1.75%	0.65%	―
AAL	64 Neutral	$10.42B	18.97	―	―	1.27%	118.64%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
ALK	54 Neutral	$6.03B	41.73	3.53%	―	31.50%	-49.15%
JBLU	51 Neutral	$1.75B	-3.66	-19.09%	―	-2.49%	47.88%

Southwest Airlines Corporate Events

Southwest Airlines Lowers 2025 EBIT Expectations Amid Challenges

Southwest Airlines has revised its expectations for full-year 2025 earnings before interest and taxes (EBIT), excluding special items, to approximately $500 million, down from the previous range of $600 million to $800 million. This adjustment is due to decreased revenue from a government shutdown and increased fuel prices, although bookings have since returned to expected levels.

Southwest Airlines Completes $1.5 Billion Debt Offering

On November 3, 2025, Southwest Airlines completed a public offering of $1.5 billion in debt securities, split equally between 4.375% Notes due 2028 and 5.250% Notes due 2035. This move is part of the company’s financial strategy to strengthen its capital structure and potentially enhance its market position.

Southwest Airlines Reports Record Q3 Revenues

On October 22, 2025, Southwest Airlines reported record third-quarter revenues of $6.9 billion, exceeding expectations with a net income of $54 million. The company attributed its success to strong execution of transformational initiatives, including the launch of assigned and extra legroom seating, and partnerships with online travel agencies and EVA Air. Southwest also announced new services at several airports and free WiFi for Rapid Rewards members. The company expects continued revenue growth and margin expansion in the fourth quarter, driven by sustained demand and strategic initiatives.