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Southwest Airlines Co. Just Beat Analysts’ Forecasts, and Analysts Are Upgrading Their Models
As you may know, Southwest Airlines Co. (NYSE:LUV) recently reported its quarterly figures. It looks like a reliable result overall – while revenues of $7.4 billion were in line with what analysts had predicted, Southwest Airlines surprised by delivering a statutory profit of $0.58 per share, a notable 13% above expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to consider. So we’ve rounded up the latest post-earnings statutory consensus estimates to see what might be in store for the year ahead.
See our latest analysis for Southwest Airlines
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Following last week’s earnings report, 16 Southwest Airlines analysts are forecasting revenue of $27.1 billion in 2024, roughly in line with the last 12 months. Statutory earnings per share are forecast to jump 383% to $0.63. However, prior to the latest earnings, analysts were expecting revenue of $27.4 billion and earnings per share (EPS) of $0.94 in 2024. Analysts appear to have become more pessimistic following the latest results. While there was no change to revenue forecasts, there was a fairly serious reduction in EPS estimates.
It may come as a surprise to learn that the consensus price target remained largely unchanged at $25.49, with analysts clearly suggesting that the anticipated decline in earnings should not have much of an impact on valuation. It may also be instructive to look at the range of analyst estimates, to assess how different the outliers are from the average. The most bullish analyst on Southwest Airlines has a price target of $33.00 per share, while the most bearish values it at $19.00. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which may suggest that the outcome is not entirely unpredictable.
Of course, another way to look at these predictions is to put them into context with the current situation. industry per se. We’d like to point out that Southwest Airlines’ revenue growth is expected to slow, with its projected annualized growth rate of 0.7% through the end of 2024 well below its historical growth rate of 10% per year over the past five years. By way of comparison, other companies in this industry with analyst coverage are expected to grow their revenue by 7.4% per year. So it’s pretty clear that while revenue growth is expected to slow, the industry as a whole is also expected to grow faster than Southwest Airlines.
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The bottom line
The biggest concern is that analysts have lowered their earnings per share estimates, suggesting that business headwinds may lie ahead for Southwest Airlines. On the positive side, there were no major changes to revenue estimates; although forecasts indicate that they will perform worse than the broader industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone major changes with the latest estimates.
That said, the company’s long-term earnings trajectory is far more important than next year’s. We have forecasts for Southwest Airlines going all the way through 2026, and you can see them for free on our platform here.
What about risks? Every company has them, and we identify them 3 Warning Signs for Southwest Airlines (of which 2 are significant!) that you should know about.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our aim is to bring you long-term focused analysis, driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, send an email editorial-team@simplywallst.com