Southwest Airlines (LUV) AI Stock Analysis

• Market Cap: $21.34B
• Dividend Yield: 2.16%
• Average Volume (3M): 10.72M
• Price to Earnings (P/E): 56.6
• Beta (1Y): 1.05
• Revenue Growth: 1.64%
• EPS Growth: 284.24%
• Country: US
• Employees: 71,506
• Sector: Industrials
• Sector Strength: 94
• Industry: Airlines, Airports & Air Services
• EPS (TTM): 0.43
• Shares Outstanding: 569,865,800
• 10 Day Avg. Volume: 11,646,692
• 30 Day Avg. Volume: 10,717,183
• PEG Ratio: 2.19
• Price to Book (P/B): 2.13
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -34.50
• Enterprise Value/Market Cap: 0.78
• Enterprise Value/Revenue: 0.21
• Enterprise Value/Gross Profit: 2.79
• Enterprise Value/Ebitda: 0.91
• 1Y Price Target: $32.29
• Price Target Upside: -2.92% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 12

• Rating: 62 Neutral
• Price Target: $35.00 ▲(5.23%Upside)

Southwest Airlines' overall stock score reflects a company in recovery mode, with significant potential offset by current economic challenges and high valuation. The company's strategic initiatives and operational improvements are promising, but macroeconomic factors and cash flow issues present risks. The cautious optimism from the earnings call and ongoing share repurchase program support a balanced outlook.

Positive Factors

International Partnerships

The interline partnership with China Airlines will increase Southwest's international connectivity.

Operational Strategies

Southwest reported a narrower-than-anticipated loss reflecting record first-quarter revenue and accelerated cost-cutting.

Strategic Initiatives

Southwest Airlines has realized $600M of its $1.8B initiatives for 2025, slightly ahead of expectations.

Negative Factors

Debt Levels

Southwest Airlines is transitioning to over $2B of net debt, contrasting with other airlines focusing on lowering net debt levels.

Macroeconomic Factors

The 2025 EBIT outlook has been significantly reduced due to macro headwinds, creating incremental earnings risk.

Profitability Challenges

The 3Q25 outlook implies an EPS loss, further indicating challenges in profitability.

Southwest Airlines Business Overview & Revenue Model

Company Description

Southwest Airlines Co. (NYSE: LUV) is a major American airline headquartered in Dallas, Texas. Founded in 1967, it operates one of the world's largest low-cost carrier services, primarily offering domestic flights within the United States. Southwest Airlines is renowned for its customer-friendly policies, including no change fees and two free checked bags, and focuses on point-to-point service rather than the traditional hub-and-spoke model.

How the Company Makes Money

Southwest Airlines generates revenue primarily through the sale of passenger tickets, which is its largest revenue stream. The airline offers low-cost fares and targets cost-conscious travelers, which helps maintain high load factors. Additionally, Southwest earns ancillary revenue from services such as EarlyBird Check-In, which allows passengers to secure a better boarding position, and other optional services. The company also benefits from partnerships with hotels, car rental agencies, and other travel-related businesses, enhancing its revenue through loyalty programs and cross-promotional activities. Furthermore, Southwest Airlines has a robust Rapid Rewards program that helps drive customer loyalty and repeat business, contributing significantly to its financial performance.

Southwest Airlines Financial Statement Overview

Summary

Southwest Airlines shows a solid recovery trajectory with increasing revenue and improved profitability margins. However, challenges in generating free cash flow and relatively low EBIT and EBITDA margins highlight areas for improvement.

Income Statement

Southwest Airlines demonstrates a strong recovery trajectory with a consistent increase in total revenue over the years, reaching $27.58 billion in the TTM. The gross profit margin improved significantly from negative in 2020 to approximately 26.3% in the TTM, indicating enhanced operational efficiency. The net profit margin, while modest at 1.98% in the TTM, reflects a positive trend from previous losses. However, the EBIT and EBITDA margins remain relatively low, signaling room for improvement in core earnings. Overall, the income statement reflects a solid recovery with potential for stronger profitability.

Balance Sheet

The balance sheet reveals a stable financial position with a notable cash reserve of $8.25 billion in the TTM. The debt-to-equity ratio decreased to approximately 0.42, indicating manageable leverage and improved financial stability. The equity ratio stands at 43.6%, suggesting a healthy proportion of equity financing. However, the return on equity (ROE) at 5.83% in the TTM is relatively low, highlighting the need for enhanced profitability to maximize shareholder returns. The balance sheet reflects a stable financial structure with a conservative approach to debt management.

Cash Flow

The cash flow statement shows a mixed performance with an operating cash flow of $1.43 billion in the TTM, suggesting operational stability. However, the free cash flow remains negative at -$563 million due to higher capital expenditures, indicating potential challenges in generating surplus cash for investments. The operating cash flow to net income ratio is strong, reflecting efficient cash generation relative to profits. Despite improvements, the cash flow position requires attention to enhance liquidity and support growth initiatives.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	27.48B	26.09B	23.81B	15.79B	9.05B
Gross Profit	4.46B	4.22B	4.75B	4.12B	-1.89B
EBITDA	2.47B	2.39B	2.38B	3.03B	-2.70B
Net Income	465.00M	465.00M	539.00M	977.00M	-3.07B
Balance Sheet
Total Assets	33.75B	36.49B	35.37B	36.32B	34.59B
Cash, Cash Equivalents and Short-Term Investments	8.72B	11.47B	12.29B	15.50B	13.33B
Total Debt	8.06B	9.23B	9.43B	12.28B	12.20B
Total Liabilities	23.40B	25.97B	24.68B	25.91B	25.71B
Stockholders Equity	10.35B	10.52B	10.69B	10.41B	8.88B
Cash Flow
Free Cash Flow	-1.62B	-389.00M	-156.00M	1.81B	-1.64B
Operating Cash Flow	462.00M	3.16B	3.79B	2.32B	-1.13B
Investing Cash Flow	-261.00M	-2.93B	-3.75B	-1.26B	-16.00M
Financing Cash Flow	-1.98B	-436.00M	-3.03B	359.00M	9.66B

Southwest Airlines Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 33.26
• 50DMA: Negative
• 100DMA: Positive
• 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 Negative. The current price of 33.26 is below the 20-day moving average (MA) of 35.22, below the 50-day MA of 33.39, and above the 200-day MA of 31.34, indicating a neutral trend. The MACD of 1.00 indicates Positive momentum. The RSI at 42.15 is Neutral, neither overbought nor oversold. The STOCH value of 52.24 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LUV.

Southwest Airlines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RYAAY	82 Outperform	$31.11B	14.78	27.12%	0.05%	10.61%	37.32%
UAL	80 Outperform	$29.05B	8.99	27.70%	―	4.23%	13.13%
DAL	79 Outperform	$36.55B	8.12	30.07%	1.10%	3.01%	-0.90%
Sector *	68 Neutral	€2.78B	22.93	7.73%	2.84%	-1.29%	-31.61%
LUV	62 Neutral	$21.34B	56.62	4.30%	2.16%	1.64%	284.24%
AAL	60 Neutral	$8.36B	14.64	-21.27%	―	1.50%	―
JBLU	47 Neutral	$1.54B	―	-11.30%	―	-3.02%	66.90%

Southwest Airlines Corporate Events

Southwest Airlines Announces $2 Billion Share Buyback

On July 23, 2025, Southwest Airlines announced a new $2.0 billion share repurchase program, reflecting confidence in its transformational plan and strong management execution. The company reported a net income of $213 million for the second quarter of 2025 and highlighted several initiatives, including the introduction of bag fees and a basic economy product, which exceeded financial expectations. Despite a decrease in passenger and operating revenues, the company remains optimistic about future growth, supported by recent improvements in industry demand and its strategic initiatives.

The most recent analyst rating on (LUV) stock is a Buy with a $42.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.

Southwest Airlines Concludes Annual Shareholders Meeting

On May 14, 2025, Southwest Airlines held its Annual Meeting of Shareholders where several key proposals were voted on. Thirteen directors were elected for terms expiring in 2026, executive compensation was approved, Ernst & Young LLP was ratified as the independent auditor, and a shareholder proposal to amend the clawback policy for unearned executive pay was rejected.

The most recent analyst rating on (LUV) stock is a Buy with a $42.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.

Southwest Airlines Amends Bylaws Following Texas Code Changes

On May 16, 2025, Southwest Airlines‘ Board of Directors approved amendments to the company’s bylaws in response to changes in the Texas Business Organizations Code. These amendments set a minimum ownership threshold for shareholders to initiate derivative proceedings and designate specific courts for internal claims, while also waiving the right to a jury trial for such claims. These changes aim to streamline legal processes and potentially impact shareholder litigation dynamics.

The most recent analyst rating on (LUV) stock is a Buy with a $42.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.