Southwest Airlines (LUV)
NYSE:LUV
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Southwest Airlines
(NYSE:LUV)
Select Model
Select Model
Rating:54Neutral
Price Target:
$43.00
▲(13.55% Upside)
Action:ReiteratedDate:03/12/26
The score reflects strong forward-looking guidance and operational momentum from the latest earnings call, but it is held back by weak and volatile free cash flow, thin current profitability, and a bearish technical setup. A high P/E further limits valuation support despite a modest dividend yield.
Positive Factors
Upgraded 2026 Earnings Guidance
Management's materially higher 2026 EPS guide and strong near‑term RASM outlook indicate a step change in earnings power. This raises the company's baseline profitability expectations, supporting sustained cash generation potential and planning flexibility over the next 2–6 months.
Negative Factors
Weak Free Cash Flow
Persistent weak free cash flow limits the company's ability to reduce debt, sustain buybacks, or invest without raising new capital. Poor cash conversion relative to reported earnings reduces financial resilience and increases vulnerability to cyclical shocks over the medium term.
Read all positive and negative factors
Positive Factors
Negative Factors
Upgraded 2026 Earnings Guidance
Management's materially higher 2026 EPS guide and strong near‑term RASM outlook indicate a step change in earnings power. This raises the company's baseline profitability expectations, supporting sustained cash generation potential and planning flexibility over the next 2–6 months.
Read all positive factors
Southwest Airlines (LUV) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$18.76B
Dividend Yield1.73%
Average Volume (3M)9.69M
Price to Earnings (P/E)50.6
Beta (1Y)1.06
Revenue Growth0.65%
EPS GrowthN/A
CountryUS
Employees71,506
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)0.58
Shares Outstanding491,318,000
10 Day Avg. Volume8,313,357
30 Day Avg. Volume9,687,748
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 Cap1.14
Enterprise Value/Revenue0.76
Enterprise Value/Gross Profit4.36
Enterprise Value/Ebitda9.54
Forecast
1Y Price Target
$48.15Price Target Upside27.15% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering17
EPS Forecast (FY)3.39
Revenue Forecast (FY)$32.32B
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:Jan 28, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 22, 2026
Earnings Call Sentiment Positive
The call was largely constructive: management highlighted successful, on-time execution of a broad transformation in 2025 that produced record revenues, outperformance on cost targets, improved operational reliability, sizable buybacks, and a materially higher starting point for 2026 earnings (guide of at least $4.00 EPS). Near-term challenges and uncertainties were acknowledged, including a small Q4 RASM decline (-0.2% YoY), projected CASM‑X pressure (~3.5% YoY in Q1), variability in load factor, and uncertainty around how quickly ancillaries and upsell behaviors will mature. On balance the positive operational and financial progress and the strong 2026 earnings guide outweigh the near-term headwinds and remaining execution/behavioral uncertainties.Positive Updates
Record Revenues and Full-Year EBIT Beat
Operating revenues of $7.4B in Q4 and $28B for the full year were quarterly and annual records. Full-year EBIT was $574M, above prior guidance of $500M; Q4 EBIT was $386M.
Negative Updates
Q4 RASM Slight Decline
Fourth-quarter RASM was down slightly, at -0.2% year-over-year, attributed in part to FAA-mandated schedule cuts.
Read all updates
Q4-2025 Updates
Positive
Negative
Record Revenues and Full-Year EBIT Beat
Operating revenues of $7.4B in Q4 and $28B for the full year were quarterly and annual records. Full-year EBIT was $574M, above prior guidance of $500M; Q4 EBIT was $386M.
Read all positive updates
Company Guidance
Southwest provided full‑year 2026 adjusted EPS guidance of at least $4 (versus 2025 adjusted EPS of $0.93) and Q1 2026 adjusted EPS of at least $0.45 (versus a Q1 2025 loss of $0.13); it expects Q1 RASM to increase at least 9.5% year‑over‑year with Q1 capacity up 1–2% YoY while operating with roughly seven fewer aircraft, and projects CASM‑X to rise about 3.5% YoY (including ~1.1 points from removing six seats on 737‑700s); management headcount expense will be flat to 2025, fleet plans call for 66 Boeing 737‑8 deliveries and ~60 retirements in 2026, full‑year net capex is expected at $3.0–$3.5 billion, and the balance sheet ended the quarter with $3.2 billion in cash and a 2.4x gross leverage ratio; management also noted $2.6 billion of 2025 share buybacks (~14% of shares) and $399 million of 2025 dividends, and said further upside from the Jan. 27 assigned/extra‑legroom launch will be quantified in a month or two before providing an upper EPS range.Southwest Airlines Financial Statement Overview
Summary
Income Statement
62
Positive
Balance Sheet
66
Positive
Cash Flow
38
Negative
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 28.06B | 27.48B | 26.09B | 23.81B | 15.79B |
| Gross Profit | 4.89B | 4.46B | 4.22B | 4.75B | 4.12B |
| EBITDA | 2.24B | 2.47B | 2.39B | 2.38B | 3.03B |
| Net Income | 441.00M | 465.00M | 465.00M | 539.00M | 977.00M |
Balance Sheet | |||||
| Total Assets | 29.06B | 33.75B | 36.49B | 35.37B | 36.32B |
| Cash, Cash Equivalents and Short-Term Investments | 3.23B | 8.72B | 11.47B | 12.29B | 15.50B |
| Total Debt | 5.98B | 8.06B | 9.20B | 9.47B | 12.28B |
| Total Liabilities | 21.08B | 23.40B | 25.97B | 24.68B | 25.91B |
| Stockholders Equity | 7.98B | 10.35B | 10.52B | 10.69B | 10.41B |
Cash Flow | |||||
| Free Cash Flow | -831.00M | -1.62B | -389.00M | -156.00M | 1.81B |
| Operating Cash Flow | 1.84B | 462.00M | 3.16B | 3.79B | 2.32B |
| Investing Cash Flow | -1.43B | -261.00M | -2.93B | -3.75B | -1.26B |
| Financing Cash Flow | -4.69B | -1.98B | -436.00M | -3.03B | 359.00M |
Southwest Airlines Technical Analysis
Negative
37.87
Price Trends
45.24
Negative
41.84
Negative
36.96
Positive
Market Momentum
-2.12
Negative
39.28
Neutral
36.95
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LUV, the sentiment is Negative. The current price of 37.87 is below the 20-day moving average (MA) of 39.57, below the 50-day MA of 45.24, and above the 200-day MA of 36.96, indicating a neutral trend. The MACD of -2.12 indicates Negative momentum. The RSI at 39.28 is Neutral, neither overbought nor oversold. The STOCH value of 36.95 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 |
|---|---|---|---|---|---|---|---|
71 Outperform | $42.86B | 8.99 | 27.63% | 0.96% | 4.33% | -1.58% | |
71 Outperform | $29.42B | 10.91 | 24.13% | ― | 4.24% | 20.29% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
54 Neutral | $18.76B | 50.61 | 5.33% | 1.73% | 0.65% | ― | |
50 Neutral | $4.23B | 69.18 | 2.47% | ― | 31.50% | -49.15% | |
46 Neutral | $1.68B | -2.79 | -26.05% | ― | -2.49% | 47.88% | |
46 Neutral | $7.14B | 25.57 | -2.76% | ― | 1.27% | 118.64% |
* Industrials Sector Average
LUV
Southwest Airlines
37.87
13.61
56.11%
ALK
Alaska Air
36.93
-4.08
-9.95%
DAL
Delta Air Lines
65.62
30.18
85.13%
JBLU
JetBlue Airways
4.55
0.95
26.39%
UAL
United Airlines Holdings
89.29
33.14
59.02%
AAL
American Airlines
10.81
1.74
19.18%
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.