Southwest Airlines (LUV) AI Stock Analysis

• Market Cap: $16.35B
• Dividend Yield: 2.28%
• Average Volume (3M): 9.79M
• Price to Earnings (P/E): 48.2
• Beta (1Y): 0.99
• 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: 12,076,463
• 30 Day Avg. Volume: 9,786,496
• 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: 1.16
• Enterprise Value/Revenue: 0.69
• Enterprise Value/Gross Profit: 4.13
• Enterprise Value/Ebitda: 8.60
• 1Y Price Target: $33.73
• Price Target Upside: 7.05% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 11
• EPS Forecast (FY): 1.07
• Revenue Forecast (FY): $28.18B

• Rating: 61 Neutral
• Price Target: $34.00 ▲(7.90% Upside)

Southwest Airlines' overall score reflects strong earnings call insights and strategic growth initiatives, offset by financial and valuation challenges. The company's operational improvements and customer satisfaction gains are significant positives, but profitability and cash flow issues, along with a high P/E ratio, pose risks.

Positive Factors

Revenue Growth

Record revenue growth indicates strong market demand and effective strategic execution, positioning Southwest Airlines for continued expansion and market leadership.

Operational Efficiency

Operational efficiency and cost discipline enhance profitability and competitiveness, ensuring sustainable growth and resilience against industry fluctuations.

Strategic Initiatives

Strategic initiatives enhance customer experience and revenue streams, strengthening brand loyalty and competitive positioning in the airline industry.

Negative Factors

Profitability Challenges

Low net profit margins indicate challenges in converting revenue into profit, potentially affecting long-term financial health and investment capacity.

Cash Flow Pressures

Negative free cash flow suggests ongoing liquidity pressures, limiting the company's ability to invest in growth opportunities and manage debt effectively.

Capacity Management

Capacity management issues can lead to revenue dilution, impacting profitability and operational efficiency, necessitating strategic adjustments for sustained growth.

Southwest Airlines Business Overview & Revenue Model

Company Description

Southwest Airlines Co. (LUV) is a major American airline headquartered in Dallas, Texas, known for its low-cost, no-frills travel model. Founded in 1967, the airline operates a large domestic route network and has recently expanded its international presence. Southwest primarily serves the passenger air transportation sector and is recognized for its unique approach of point-to-point service, which contrasts with the traditional hub-and-spoke model used by many competitors. The company also focuses on customer service and operational efficiency as part of its core offerings.

How the Company Makes Money

Southwest Airlines generates revenue primarily through ticket sales, which constitute the bulk of its income. The airline employs a low-cost fare structure that encourages high volume travel while also offering various fare classes to cater to different customer segments. Additionally, Southwest earns revenue from ancillary services, such as early boarding, baggage fees, and in-flight sales, though it prides itself on having no change fees which can attract more travelers. The company also benefits from partnerships with hotels, car rental companies, and travel agencies, allowing customers to bundle services and generating additional revenue streams. The loyalty program, Rapid Rewards, also contributes to repeat business and customer retention, enhancing overall profitability.

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 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: Neutral
• Last Price: 31.51
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LUV, the sentiment is Neutral. The current price of 31.51 is below the 20-day moving average (MA) of 32.07, below the 50-day MA of 32.10, and above the 200-day MA of 31.25, indicating a neutral trend. The MACD of -0.46 indicates Positive momentum. The RSI at 48.25 is Neutral, neither overbought nor oversold. The STOCH value of 47.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for LUV.

Southwest Airlines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DAL	78 Outperform	$36.34B	7.84	28.52%	1.17%	4.33%	-1.58%
UAL	68 Neutral	$31.29B	9.59	25.59%	―	4.24%	20.29%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
AAL	63 Neutral	$8.35B	16.13	―	―	1.27%	118.64%
LUV	61 Neutral	$16.35B	48.19	4.22%	2.28%	0.65%	―
ALK	58 Neutral	$4.66B	33.63	3.53%	―	31.50%	-49.15%
JBLU	46 Neutral	$1.56B	―	-19.09%	―	-2.49%	47.88%

Southwest Airlines Corporate Events

Southwest Airlines’ Earnings Call Highlights Record Revenue and Strategic Success

Southwest Airlines’ recent earnings call conveyed a positive sentiment, highlighting the company’s strong revenue performance, operational reliability, and successful strategic initiatives. Despite challenges such as the government shutdown and increased capacity, the focus remained on growth and customer satisfaction improvements, which were emphasized as outweighing the lowlights.

Southwest Airlines Reports Record Revenue and Strategic Growth

Southwest Airlines Co., a major player in the airline industry, is known for its low-cost carrier model and extensive domestic flight network across the United States. The company is recognized for its customer-friendly policies and operational efficiency.

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.

The most recent analyst rating on (LUV) stock is a Hold with a $36.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.