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Factors to Know Ahead of Southwest's (LUV) Q4 Earnings
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Southwest Airlines (LUV - Free Report) is scheduled to report fourth-quarter 2022 results on Jan 26, before market open.
The company has a stellar earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters by an average of 54.74%.
Given this backdrop, let's delve deeper to unearth the factors that are likely to have influenced LUV’s fourth-quarter 2022 performance.
Southwest Airlines was the worst-affected U.S. airline in terms of flight cancellations due to unfavorable weather conditions during the Christmas holiday weekend. LUV had to cancel in excess of 16,700 flights in the Dec 21-Dec 31, 2022, timeframe due to the inclement weather.
The mass cancellations are likely to have dented the company's fourth-quarter 2022 performance. Following the massive cancellations, LUV expects available seat miles (a measure of capacity) to decline approximately 6% in fourth-quarter 2022 from the fourth-quarter 2019 actuals. The previous guidance hinted at a 2% decline in available seat miles for fourth-quarter 2022.
Revenues are likely to be adversely impacted by $400-$425 million. Following the massive flight cancellations, management expects a pre-tax hit of $725-$825 million to fourth-quarter earnings.
However, LUV’s focus on boosting cargo revenues is likely to have aided its performance in the to-be-reported quarter. The Zacks Consensus Estimate for fourth-quarter 2022 cargo revenues hints at an 11.6% sequential increase.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for LUV this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Southwest Airlines has an Earnings ESP of -101.96% (the Most Accurate Estimate indicates break even earnings at present, while the Zacks Consensus Estimate is presently pegged at 22 cents) and a Zacks Rank #3.
Highlights of Q3
Southwest Airlines' third-quarter 2022 earnings of 50 cents per share outpaced the Zacks Consensus Estimate of 41 cents. Moreover, the bottom line improved more than 100% year over year. Revenues of $6,220 million lagged the Zacks Consensus Estimate of $6,228.1 million but improved 32.9% year over year on the back of an improvement in leisure demand and close-in bookings in September 2022.
Stocks to Consider
Here are a few stocks from the broader Zacks Transportation sector that investors may consider, as our model shows that these have the right combination of elements to beat on their fourth-quarter 2022 earnings.
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Factors to Know Ahead of Southwest's (LUV) Q4 Earnings
Southwest Airlines (LUV - Free Report) is scheduled to report fourth-quarter 2022 results on Jan 26, before market open.
The company has a stellar earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters by an average of 54.74%.
Southwest Airlines Co. Price and EPS Surprise
Southwest Airlines Co. price-eps-surprise | Southwest Airlines Co. Quote
Given this backdrop, let's delve deeper to unearth the factors that are likely to have influenced LUV’s fourth-quarter 2022 performance.
Southwest Airlines was the worst-affected U.S. airline in terms of flight cancellations due to unfavorable weather conditions during the Christmas holiday weekend. LUV had to cancel in excess of 16,700 flights in the Dec 21-Dec 31, 2022, timeframe due to the inclement weather.
The mass cancellations are likely to have dented the company's fourth-quarter 2022 performance. Following the massive cancellations, LUV expects available seat miles (a measure of capacity) to decline approximately 6% in fourth-quarter 2022 from the fourth-quarter 2019 actuals. The previous guidance hinted at a 2% decline in available seat miles for fourth-quarter 2022.
Revenues are likely to be adversely impacted by $400-$425 million. Following the massive flight cancellations, management expects a pre-tax hit of $725-$825 million to fourth-quarter earnings.
However, LUV’s focus on boosting cargo revenues is likely to have aided its performance in the to-be-reported quarter. The Zacks Consensus Estimate for fourth-quarter 2022 cargo revenues hints at an 11.6% sequential increase.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for LUV this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Southwest Airlines has an Earnings ESP of -101.96% (the Most Accurate Estimate indicates break even earnings at present, while the Zacks Consensus Estimate is presently pegged at 22 cents) and a Zacks Rank #3.
Highlights of Q3
Southwest Airlines' third-quarter 2022 earnings of 50 cents per share outpaced the Zacks Consensus Estimate of 41 cents. Moreover, the bottom line improved more than 100% year over year. Revenues of $6,220 million lagged the Zacks Consensus Estimate of $6,228.1 million but improved 32.9% year over year on the back of an improvement in leisure demand and close-in bookings in September 2022.
Stocks to Consider
Here are a few stocks from the broader Zacks Transportation sector that investors may consider, as our model shows that these have the right combination of elements to beat on their fourth-quarter 2022 earnings.
JetBlue Airways (JBLU - Free Report) has an Earnings ESP of +6.77% and a Zacks Rank #3. JBLU will release results on Jan 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
We expect upbeat air-travel demand to have aided JBLU’s fourth-quarter performance. However, high costs are expected to have been a dampener.
Norfolk Southern Corporation (NSC - Free Report) has an Earnings ESP of +0.55% and a Zacks Rank #3. NSC will release results on Jan 25.
We expect the upbeat demand scenario to have aided NSC’s fourth-quarter performance. However, high fuel costs are expected to have been a dampener.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.