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Southwest Airlines
(NYSE:LUV)
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Rating:56Neutral
Price Target:
$54.00
▲(26.46% Upside)
Action:Reiterated
Date:06/27/26
LUV scores in the mid-range primarily due to improving—but still mixed—fundamentals: leverage is better and profitability has returned, but thin margins and negative free cash flow remain key constraints. Technicals are supportive with strong trend momentum, though overbought readings raise near-term risk. Valuation is a headwind given a high P/E alongside a modest dividend yield. Earnings call sentiment is constructive on revenue/margin momentum, but fuel-driven guidance uncertainty limits the upside to the score.
Positive Factors
Revenue and unit-revenue strength
Sustained unit-revenue gains and record quarterly revenue indicate durable pricing power and demand resilience across the network. Over a 2–6 month horizon, stronger RASM supports margin recovery, funds reinvestment, and reduces reliance on cyclical demand spikes for profitability.
Negative Factors
Negative free cash flow and weak cash conversion
Persistent negative free cash flow despite positive operating cash flow signals capital intensity and reinvestment needs that outpace cash generation. Over months this constrains discretionary spending, limits rapid deleveraging, and reduces flexibility to fund buybacks or weather revenue shocks without borrowing.
Read all positive and negative factors
Positive Factors
Negative Factors
Revenue and unit-revenue strength
Sustained unit-revenue gains and record quarterly revenue indicate durable pricing power and demand resilience across the network. Over a 2–6 month horizon, stronger RASM supports margin recovery, funds reinvestment, and reduces reliance on cyclical demand spikes for profitability.
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
$24.67B
Dividend Yield1.73%
Average Volume (3M)6.22M
Price to Earnings (P/E)31.9
Beta (1Y)1.18
Revenue Growth4.72%
EPS Growth72.71%
CountryUS
Employees71,506
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)1.58
Shares Outstanding488,773,700
10 Day Avg. Volume7,065,051
30 Day Avg. Volume6,217,496
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 Cap1.07
Enterprise Value/Revenue0.91
Enterprise Value/Gross Profit5.54
Enterprise Value/Ebitda9.66
Forecast
1Y Price Target
$50.83Price Target Upside19.04% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering15
EPS Forecast (FY)2.81
Revenue Forecast (FY)$32.70B
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:Apr 22, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Jul 22, 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 | 2.72B | 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 | -356.00M | -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
42.56
Positive
43.20
Positive
39.84
Positive
Market Momentum
2.72
Negative
67.15
Neutral
68.34
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 below the 20-day moving average (MA) of 46.63, above the 50-day MA of 42.56, and above the 200-day MA of 39.84, indicating a bullish trend. The MACD of 2.72 indicates Negative momentum. The RSI at 67.15 is Neutral, neither overbought nor oversold. The STOCH value of 68.34 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 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 |
|---|---|---|---|---|---|---|---|
74 Outperform | $61.14B | 13.45 | 23.14% | 0.96% | 5.24% | 20.93% | |
73 Outperform | $43.86B | 12.00 | 24.91% | ― | 4.73% | 1.55% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
56 Neutral | $24.67B | 31.94 | 10.67% | 1.73% | 4.72% | 72.71% | |
52 Neutral | $5.71B | 89.91 | 1.85% | ― | 13.94% | -79.71% | |
50 Neutral | $2.20B | -3.05 | -33.13% | ― | -0.52% | -138.22% | |
50 Neutral | $12.00B | 58.55 | -5.17% | ― | 3.33% | -70.60% |
* Industrials Sector Average
LUV
Southwest Airlines
50.25
16.80
50.22%
ALK
Alaska Air
51.09
0.04
0.08%
DAL
Delta Air Lines
92.75
42.49
84.55%
JBLU
JetBlue Airways
6.02
1.56
34.98%
UAL
United Airlines Holdings
135.13
52.77
64.07%
AAL
American Airlines
18.15
6.46
55.26%
Southwest Airlines Corporate Events
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...
Executive/Board ChangesShareholder Meetings
Southwest Shareholders Back Board, Pay and Auditor Choices
Positive
May 11, 2026
Southwest Airlines held its Annual Meeting of Shareholders on May 7, 2026, during which shareholders elected eleven directors to serve terms expiring at the 2027 Annual Meeting, with most nominees receiving strong support but notable opposition re...
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.