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Southwest Airlines
(NYSE:LUV)
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Rating:54Neutral
Price Target:
$45.00
▼(-0.18% Downside)
Action:Reiterated
Date:08/17/26
The score is held back mainly by financial quality—especially negative free cash flow despite better operating cash flow—and thin operating margins that remain sensitive to costs. Technical indicators also point to weak near-term momentum (negative MACD, RSI below 50, price below key short-term averages). Offsetting these, the earnings call showed a notable commercial turnaround (record revenue, strong unit revenue growth, margin expansion), though fuel-driven guidance risk keeps the outlook from scoring higher.
Positive Factors
Strong revenue and unit-revenue growth
Record revenue and double-digit unit-revenue growth indicate improving pricing, demand capture and network productivity. If sustained, these trends can support stronger earnings power and provide a durable foundation for margin recovery.
Negative Factors
Thin and cost-sensitive profitability
Southwest’s earnings remain exposed to relatively small changes in fares, fuel, labor and operating costs because margins are thin. This limits financial protection during demand weakness or periods of industry-wide capacity pressure.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong revenue and unit-revenue growth
Record revenue and double-digit unit-revenue growth indicate improving pricing, demand capture and network productivity. If sustained, these trends can support stronger earnings power and provide a durable foundation for margin recovery.
Read all positive 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 (LUV) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$19.75B
Dividend Yield1.78%
Average Volume (3M)6.38M
Price to Earnings (P/E)24.3
Beta (1Y)1.20
Revenue Growth9.46%
EPS Growth137.74%
CountryUS
Employees73,456
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)1.66
Shares Outstanding489,208,200
10 Day Avg. Volume5,944,393
30 Day Avg. Volume6,382,634
Financial Highlights & Ratios
PEG Ratio40.83
Price to Book (P/B)2.80
Price to Sales (P/S)0.80
P/FCF Ratio-26.86
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$53.79Price Target Upside19.31% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering14
EPS Forecast (FY)3.4
Revenue Forecast (FY)$32.96B
Southwest Airlines Business Overview & Revenue Model
Company Description
Southwest Airlines Co. functions as a passenger airline, offering scheduled air travel services predominantly across the United States and to select neighboring international markets. As of December 31, 2021, the company maintained a consistent fl...
How the Company Makes Money
Southwest primarily earns revenue by selling air transportation to passengers. Its core revenue stream is passenger ticket revenue (fares) generated from scheduled flights across its route network. The company also generates ancillary revenue tied...
Southwest Airlines Earnings Call Summary
Earnings Call Date:Jul 22, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Oct 21, 2026
Earnings Call Sentiment Positive
The call presented a strong operational and commercial turnaround: record revenues, double-digit unit revenue growth (20.1% YoY), wide engagement gains across loyalty and co-brand metrics, margin expansion to 6.7% despite nearly $900 million higher fuel expense in the quarter, and robust cash generation and liquidity. Management acknowledged elevated and volatile fuel costs (fuel headwind ~ $1.33 per share YTD) and a modest accounting breakage adjustment, plus some small-scale operational delays tied to product rollout. Guidance was updated (full-year EPS range narrowed/replaced), reflecting the fuel outlook but management emphasized demand durability, optimization opportunities, and ongoing margin expansion. Overall, the positive operational and commercial achievements substantially outweigh the challenges.Positive Updates
Record Revenue and Unit Revenue Strength
Adjusted operating revenue reached a record $8.7 billion (highest quarterly revenue in company history). Adjusted unit revenues (RASM) increased 20.1% year-over-year to an all-time quarterly record, exceeding the high end of prior guidance.
Negative Updates
Elevated Fuel Costs and EPS Headwind
Q2 experienced nearly $900 million year-over-year increase in fuel expense; fuel averaged $3.92 per gallon in the quarter. Management cited an estimated year-to-date fuel headwind of approximately $1.33 per share, and updated full-year EPS guidance reflects the forward fuel curve (range $3.25–$4.25 replacing prior expectation of at least $4).
Read all updates
Q2-2026 Updates
Positive
Negative
Record Revenue and Unit Revenue Strength
Adjusted operating revenue reached a record $8.7 billion (highest quarterly revenue in company history). Adjusted unit revenues (RASM) increased 20.1% year-over-year to an all-time quarterly record, exceeding the high end of prior guidance.
Read all positive updates
Company Guidance
Southwest updated full‑year 2026 adjusted EPS guidance to $3.25–$4.25 (replacing prior “at least $4”), citing the July 17 forward fuel curve and current fare/demand trends and estimating a year‑to‑date fuel headwind of about $1.33 per share; for Q3 it expects unit revenues up 17.5%–19.5% y/y (booked ~65% with Q3 yields running ~+24% y/y at the time of the call) and CASM‑ex up 3.5%–4.0% y/y on capacity flat to down 1%. Management noted key context metrics including Q2 adjusted RASM +20.1% y/y, Q2 adjusted operating revenue $8.7B, Q2 adjusted operating margin 6.7% (up 3.3 pts y/y), Q2 fuel at $3.92/gal, H1 operating cash flow ~ $2B, Q2 operating cash flow $500M (+32% y/y), liquidity $5.3B and gross leverage 2.1x.Southwest Airlines Financial Statement Overview
Summary
Income Statement
62
Positive
Balance Sheet
57
Neutral
Cash Flow
41
Neutral
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 30.07B | 28.06B | 27.48B | 26.09B | 23.81B | 15.79B |
| Gross Profit | 18.35B | 4.89B | 4.46B | 4.22B | 4.75B | 4.12B |
| EBITDA | 2.71B | 2.24B | 2.47B | 2.39B | 2.38B | 3.03B |
| Net Income | 837.00M | 441.00M | 465.00M | 465.00M | 539.00M | 977.00M |
Balance Sheet | ||||||
| Total Assets | 30.12B | 29.06B | 33.75B | 36.49B | 35.37B | 36.32B |
| Cash, Cash Equivalents and Short-Term Investments | 3.79B | 3.23B | 8.72B | 11.47B | 12.29B | 15.50B |
| Total Debt | 6.89B | 5.98B | 8.06B | 9.20B | 9.47B | 12.28B |
| Total Liabilities | 23.04B | 21.08B | 23.40B | 25.97B | 24.68B | 25.91B |
| Stockholders Equity | 7.08B | 7.98B | 10.35B | 10.52B | 10.69B | 10.41B |
Cash Flow | ||||||
| Free Cash Flow | -621.00M | -831.00M | -1.62B | -356.00M | -156.00M | 1.81B |
| Operating Cash Flow | 2.36B | 1.84B | 462.00M | 3.16B | 3.79B | 2.32B |
| Investing Cash Flow | -2.17B | -1.43B | -261.00M | -2.93B | -3.75B | -1.26B |
| Financing Cash Flow | -39.00M | -4.69B | -1.98B | -436.00M | -3.03B | 359.00M |
Southwest Airlines Risk Analysis
Southwest Airlines disclosed 1 risk factors in its most recent earnings report. Southwest Airlines reported the most risks in the "Finance & Corporate" 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 |
|---|---|---|---|---|---|---|---|
77 Outperform | $54.19B | 13.55 | 19.33% | 0.91% | 10.28% | -12.67% | |
70 Outperform | $36.73B | 10.56 | 22.50% | ― | 8.48% | 6.74% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
54 Neutral | $19.75B | 24.33 | 11.27% | 1.60% | 9.46% | 137.74% | |
52 Neutral | $1.85B | -2.03 | -45.51% | ― | 3.99% | -119.13% | |
46 Neutral | $4.51B | -25.58 | -4.50% | ― | 9.79% | -161.50% | |
46 Neutral | $9.15B | -28.20 | 8.29% | ― | 7.53% | -157.37% |
* Industrials Sector Average
LUV
Southwest Airlines
40.38
8.46
26.50%
ALK
Alaska Air
40.41
-19.60
-32.66%
DAL
Delta Air Lines
82.41
22.65
37.91%
JBLU
JetBlue Airways
4.89
-0.36
-6.86%
UAL
United Airlines Holdings
113.17
10.83
10.58%
AAL
American Airlines
13.82
0.82
6.31%
Southwest Airlines Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Southwest Airlines Establishes New $2 Billion Credit Facility
Positive
Aug 12, 2026
On August 10, 2026, Southwest Airlines entered into a new $2 billion five‑year revolving credit facility with a syndicate of lenders led by JPMorgan Chase Bank and Citibank, replacing a prior facility dated August 3, 2016 that had been sched...
Business Operations and StrategyExecutive/Board Changes
Southwest Airlines adds industry leaders to expanded board
Positive
Aug 10, 2026
On August 10, 2026, Southwest Airlines’ Board of Directors expanded its membership to thirteen and appointed Rocket Companies and Redfin executive Varun Krishna and Royal Caribbean Cruises Chair and CEO Jason T. Liberty as new directors. The...
Business Operations and StrategyExecutive/Board Changes
Southwest Airlines Raises Executive Pay to Retain Leadership
Positive
Aug 7, 2026
On August 5, 2026, Southwest Airlines’ Compensation Committee approved increases to annual base salaries and long-term incentive targets for several senior officers, effective August 15, 2026, including President and CEO Bob Jordan, whose ba...
Business Operations and StrategyPrivate Placements and Financing
Southwest Airlines Expands Secured Term Loan Borrowing Capacity
Positive
May 19, 2026
On May 19, 2026, Southwest Airlines Co. amended its March 11, 2026 senior secured term loan credit facility by entering into an Increase Joinder Agreement No. 1 and First Amendment to its Credit Agreement with BNP Paribas and existing lenders. The...
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.