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Southwest Airlines
(NYSE:LUV)
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Rating:58Neutral
Price Target:
$50.00
▲(10.91% Upside)
Action:Reiterated
Date:07/23/26
The score is primarily held back by mixed financial quality—thin margins, notable leverage with a reduced equity cushion, and negative recent free cash flow—despite improving revenue and profitability. The latest earnings call was a clear positive on unit revenues, margins, liquidity, and demand indicators, but the fuel-driven reduction in full-year EPS expectations and high P/E temper the upside. Technically, the longer-term trend is supportive, though near-term momentum is not strong.
Positive Factors
Unit revenue strength & record revenue
Sustained double-digit unit revenue growth and record quarterly operating revenue indicate durable pricing power and strong demand capture across the network. Over 2–6 months this supports margin expansion potential and gives management room to fund operations and strategic initiatives without relying solely on cost cuts.
Negative Factors
Fuel cost volatility and EPS headwind
Heavy exposure to jet fuel swings creates persistent earnings volatility and forced guidance resets. Fuel-driven EPS pressure reduces predictability of margins and requires higher unit revenues or hedging to protect profitability, leaving earnings sensitive to commodity cycles for months ahead.
Read all positive and negative factors
Positive Factors
Negative Factors
Unit revenue strength & record revenue
Sustained double-digit unit revenue growth and record quarterly operating revenue indicate durable pricing power and strong demand capture across the network. Over 2–6 months this supports margin expansion potential and gives management room to fund operations and strategic initiatives without relying solely on cost cuts.
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
$22.00B
Dividend Yield1.6%
Average Volume (3M)6.38M
Price to Earnings (P/E)27.1
Beta (1Y)1.19
Revenue Growth9.46%
EPS Growth137.74%
CountryUS
Employees72,790
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)3.34
Revenue Forecast (FY)$32.91B
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 | $57.50B | 14.38 | 19.33% | 0.91% | 10.28% | -12.67% | |
70 Outperform | $39.38B | 11.32 | 22.50% | ― | 8.48% | 6.74% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
58 Neutral | $22.00B | 27.09 | 11.27% | 1.60% | 9.46% | 137.74% | |
49 Neutral | $2.28B | -2.50 | -45.51% | ― | 3.99% | -119.13% | |
46 Neutral | $5.29B | -30.03 | -4.50% | ― | 9.79% | -161.50% | |
46 Neutral | $10.11B | -31.16 | 8.29% | ― | 7.53% | -157.37% |
* Industrials Sector Average
LUV
Southwest Airlines
44.97
15.77
54.00%
ALK
Alaska Air
47.45
-5.13
-9.76%
DAL
Delta Air Lines
87.44
35.49
68.31%
JBLU
JetBlue Airways
6.03
1.69
38.94%
UAL
United Airlines Holdings
121.33
34.32
39.44%
AAL
American Airlines
15.27
4.00
35.49%
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.