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Southwest Airlines Shares Up 5% on Improved Third-Quarter Outlook
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Shares of Southwest Airlines Co. (LUV - Free Report) performed well on the bourse on Sept. 26, 2024, closing the trading session at $29.93 per share, up 5.42% from the previous day's closing. The upside was owing to the improved third-quarter 2024 guidance revealed by the company.
LUV now anticipates its third-quarter revenue per available seat mile (RASM or unit revenues) to increase in the range of 2%-3% on a year-over-year basis. This marks an improvement from the previous forecast of flat to down 2%. The upside in revenue performance was driven by the improving industry demand trends, along with the company's revenue management techniques.
Apart from the air travel demand strength, additional revenues in July related to the CrowdStrike (CRWD - Free Report) -induced disruptions across the industry also contributed to LUV’s top-line growth. The global technology outage on July 19, 2024, caused by security software provider CrowdStrike’s software update, has hit some of the major U.S. airlines, leading to multiple flight cancelations. LUV reaped the benefits from the troubles of its competitors’ flight cancelations.
For the remainder of 2024, LUV anticipates RASM to trend positive on a year-over-year basis.
Third-quarter capacity or available seat miles (ASMs) are still estimated to improve 2% from the year-ago reported figure.
Economic fuel cost per gallon for the third quarter is now expected to be in the range of $2.50-$2.60 (prior view: $2.60 to $2.70). Lower fuel costs should boost the company’s bottom line, as fuel expenses represent a key input cost for any transportation player.
Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and profit-sharing expenses, and special items, is still expected to increase in the range of 11-13% in the third quarter from the comparable period in 2023.
Interest expenses are now expected to be $63 million (prior view: $62 million) in the third quarter.
For 2024, LUV continues to expect capacity to improve 4% from the 2023 level. Economic fuel costs per gallon view have been lowered to the range of $2.60-$2.70 from the previously guided range of $2.70-$2.80. CASM, excluding fuel, oil and profit-sharing expenses, and special items, is still anticipated to increase 7-8% in 2024 from 2023. The effective tax rate is expected to be 24% in 2024. Capital expenditures are anticipated to be around $2.5 billion for 2024.
Interest expenses are now expected to be $253 million (prior view: $252 million) in 2024.
Apart from issuing encouraging guidance, LUV also laid out an impressive roadmap for its growth and announced a new share buyback plan. As part of its growth strategy, LUV anticipates to deliver an estimated $500 million of run-rate cost savings in 2027. The company aims to achieve that by minimizing hiring, optimizing scheduling, improving corporate efficiency and capitalizing on supply chain opportunities. LUV also intends to upgrade its fleet and hopes to reach an average fleet age of five years in 2031. The airline intends to reduce average capital expenditures for aircraft to around $50 million through 2027.
LUV’s board of directors has authorized a new $2.5 billion share repurchase program. LUV has terminated and replaced its prior share repurchase program, authorized in May 2019, with the new share repurchase program.
Given this encouraging outlook, investors are keenly waiting for the third-quarter earnings releases of LUV, which is slated to be released on Oct. 24, 2024.
Seattle, WA-based airline heavyweight Alaska Air Group, Inc. (ALK - Free Report) raised its third-quarter 2024 adjusted earnings per share guidance to the range of $2.15-$2.25 from the previously guided range of $1.40 to $1.60. The Zacks Consensus Estimate is currently pegged at $2.05 per share. Improved revenue and fuel cost outlook have led to the encouraging earnings per share forecast.
Alaska Air has witnessed upbeat air travel demand during the summer season, offering hassle-free service for guests with a 99.3% completion rate quarter-to-date. Backed by the upbeat demand, Alaska Air now expects its third-quarter 2024 revenue per available seat mile (a key measure of unit revenues) to be up 2% on a year-over-year basis, an improvement from the previous forecast of flat to positive.
ALK continues to expect third-quarter capacity (measured in available seat miles) to increase in the range of 2-3% on a year-over-year basis. Third-quarter 2024 economic fuel cost per gallon is now expected to be in the range of $2.60-$2.70 (prior view: $2.85-$2.95).
Allegiant Travel Company (ALGT - Free Report) now anticipates its third-quarter capacity for scheduled service to increase 1.6% on a year-over-year basis, an improvement from the prior expectation of an increase of 1.3%. Operating margin is now expected to decline in the 0.5-1.5% range, which marks an improvement over the prior forecast to decline in the 4.5-6.5% band.
Loss per share is now anticipated to be in the range of $1.75–$2.25, which marks an improvement from the prior expectation of $2.50–$3.50. The Zacks Consensus Estimate is pegged at a loss of $2.48 per share.
Third-quarter unit revenues are likely to be down 5.5% year over year compared with the prior expectation to be down 7.5%. Third-quarter 2024 fuel cost per gallon is expected to be $2.70, down from the prior view of $2.80. Non-fuel unit costs are expected to be up almost 4.5% on a year-over-year basis, an upside of 2.5 points from the prior view of increasing 7%.
JBLU now anticipates its third-quarter revenues to be down 2.5% to up 1% on a year-over-year basis. This marks an improvement from the previous guidance of a decline in the range of 1.5-5.5%. JBLU now expects its third-quarter capacity to decline in the 3-5% range, which marks an improvement over the prior forecast to decline in the 3-6% band.
JetBlue now anticipates third-quarter 2024 average fuel cost per gallon in the range of $2.70-$2.80 (prior view: $2.82 - $2.97). JBLU now anticipates consolidated operating costs per available seat mile (excluding fuel and special items) to increase in the range of 5-7%, down from the prior expectation of a 6-8% increase.
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Southwest Airlines Shares Up 5% on Improved Third-Quarter Outlook
Shares of Southwest Airlines Co. (LUV - Free Report) performed well on the bourse on Sept. 26, 2024, closing the trading session at $29.93 per share, up 5.42% from the previous day's closing. The upside was owing to the improved third-quarter 2024 guidance revealed by the company.
LUV now anticipates its third-quarter revenue per available seat mile (RASM or unit revenues) to increase in the range of 2%-3% on a year-over-year basis. This marks an improvement from the previous forecast of flat to down 2%. The upside in revenue performance was driven by the improving industry demand trends, along with the company's revenue management techniques.
Apart from the air travel demand strength, additional revenues in July related to the CrowdStrike (CRWD - Free Report) -induced disruptions across the industry also contributed to LUV’s top-line growth. The global technology outage on July 19, 2024, caused by security software provider CrowdStrike’s software update, has hit some of the major U.S. airlines, leading to multiple flight cancelations. LUV reaped the benefits from the troubles of its competitors’ flight cancelations.
For the remainder of 2024, LUV anticipates RASM to trend positive on a year-over-year basis.
Third-quarter capacity or available seat miles (ASMs) are still estimated to improve 2% from the year-ago reported figure.
Economic fuel cost per gallon for the third quarter is now expected to be in the range of $2.50-$2.60 (prior view: $2.60 to $2.70). Lower fuel costs should boost the company’s bottom line, as fuel expenses represent a key input cost for any transportation player.
Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and profit-sharing expenses, and special items, is still expected to increase in the range of 11-13% in the third quarter from the comparable period in 2023.
Interest expenses are now expected to be $63 million (prior view: $62 million) in the third quarter.
For 2024, LUV continues to expect capacity to improve 4% from the 2023 level. Economic fuel costs per gallon view have been lowered to the range of $2.60-$2.70 from the previously guided range of $2.70-$2.80. CASM, excluding fuel, oil and profit-sharing expenses, and special items, is still anticipated to increase 7-8% in 2024 from 2023. The effective tax rate is expected to be 24% in 2024. Capital expenditures are anticipated to be around $2.5 billion for 2024.
Interest expenses are now expected to be $253 million (prior view: $252 million) in 2024.
Apart from issuing encouraging guidance, LUV also laid out an impressive roadmap for its growth and announced a new share buyback plan. As part of its growth strategy, LUV anticipates to deliver an estimated $500 million of run-rate cost savings in 2027. The company aims to achieve that by minimizing hiring, optimizing scheduling, improving corporate efficiency and capitalizing on supply chain opportunities. LUV also intends to upgrade its fleet and hopes to reach an average fleet age of five years in 2031. The airline intends to reduce average capital expenditures for aircraft to around $50 million through 2027.
LUV’s board of directors has authorized a new $2.5 billion share repurchase program. LUV has terminated and replaced its prior share repurchase program, authorized in May 2019, with the new share repurchase program.
Given this encouraging outlook, investors are keenly waiting for the third-quarter earnings releases of LUV, which is slated to be released on Oct. 24, 2024.
LUV’s Zacks Rank
LUV currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bullish Q3 Projections of Other Airline Companies
Seattle, WA-based airline heavyweight Alaska Air Group, Inc. (ALK - Free Report) raised its third-quarter 2024 adjusted earnings per share guidance to the range of $2.15-$2.25 from the previously guided range of $1.40 to $1.60. The Zacks Consensus Estimate is currently pegged at $2.05 per share. Improved revenue and fuel cost outlook have led to the encouraging earnings per share forecast.
Alaska Air has witnessed upbeat air travel demand during the summer season, offering hassle-free service for guests with a 99.3% completion rate quarter-to-date. Backed by the upbeat demand, Alaska Air now expects its third-quarter 2024 revenue per available seat mile (a key measure of unit revenues) to be up 2% on a year-over-year basis, an improvement from the previous forecast of flat to positive.
ALK continues to expect third-quarter capacity (measured in available seat miles) to increase in the range of 2-3% on a year-over-year basis. Third-quarter 2024 economic fuel cost per gallon is now expected to be in the range of $2.60-$2.70 (prior view: $2.85-$2.95).
Allegiant Travel Company (ALGT - Free Report) now anticipates its third-quarter capacity for scheduled service to increase 1.6% on a year-over-year basis, an improvement from the prior expectation of an increase of 1.3%. Operating margin is now expected to decline in the 0.5-1.5% range, which marks an improvement over the prior forecast to decline in the 4.5-6.5% band.
Loss per share is now anticipated to be in the range of $1.75–$2.25, which marks an improvement from the prior expectation of $2.50–$3.50. The Zacks Consensus Estimate is pegged at a loss of $2.48 per share.
Third-quarter unit revenues are likely to be down 5.5% year over year compared with the prior expectation to be down 7.5%. Third-quarter 2024 fuel cost per gallon is expected to be $2.70, down from the prior view of $2.80. Non-fuel unit costs are expected to be up almost 4.5% on a year-over-year basis, an upside of 2.5 points from the prior view of increasing 7%.
Long Island City, NY-based airline JetBlue Airways Corporation (JBLU - Free Report) has issued improved third-quarter 2024 guidance on the back of upbeat travel demand and low fuel costs.
JBLU now anticipates its third-quarter revenues to be down 2.5% to up 1% on a year-over-year basis. This marks an improvement from the previous guidance of a decline in the range of 1.5-5.5%. JBLU now expects its third-quarter capacity to decline in the 3-5% range, which marks an improvement over the prior forecast to decline in the 3-6% band.
JetBlue now anticipates third-quarter 2024 average fuel cost per gallon in the range of $2.70-$2.80 (prior view: $2.82 - $2.97). JBLU now anticipates consolidated operating costs per available seat mile (excluding fuel and special items) to increase in the range of 5-7%, down from the prior expectation of a 6-8% increase.