We have just finished one of the busiest travel seasons of the year, the Thanksgiving holiday weekend. And now we are gearing up for Christmas, which should be every bit as busy. These two major holidays within a month of each other are bringing hope to carriers such as Southwest Airlines (LUV).
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In fact, Southwest recently revealed that it expects improved revenue in this year’s fourth quarter, and that gave investors hope as shares were up nearly 3% on the day. Southwest forecasts revenue will be up between 5.5% and 7% from a year earlier. This is a function of not only surging demand, but demand that appears resistant to rising costs and higher fares.
Plus, Southwest has been actively working to pare back “unprofitable flights,” a move that is giving it a cost savings advantage as well. Moreover, Southwest also looks to conclude a “sale-leaseback” of aircraft starting in the first quarter of next year, which will likely provide further help. Essentially, the “difficult decisions” that Southwest announced back in late September are starting to pay off.
Changes in the Air
Some other changes announced by Southwest include a plan to stop its food and beverage service earlier, which would reduce danger from turbulence. Further, passengers would be prepared for landing earlier in a flight than normal.
Finally, Southwest is pushing back against Diversity, Equity and Inclusion (DEI). Word is that Southwest has acknowledged and agreed to abandon its unlawful discriminatory employment practices outlined in AFL’s federal civil rights complaint. The matter is connected to the equal opportunity clause of employment, and now, Southwest will no longer engage in “…race and sex-based discrimination in all hiring and promotional processes….”
Is LUV Stock a Buy?
Turning to Wall Street, analysts have a Hold consensus rating on LUV stock based on two Buys, nine Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 28.28% rally in its share price over the past year, the average LUV price target of $30.29 per share implies 13.75% downside risk.
