Shares of Southwest Airlines (NYSE:LUV) are in focus today after the company updated its financial outlook. Leisure demand remained strong during the Thanksgiving period. Further, Close-in bookings came in at the higher end of Southwest’s expectations.
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Consequently, it now expects record operating revenues and passenger numbers for the fourth quarter. In Q4, the available seat miles (ASM) are expected to be up 21% year-over-year. Further, operating revenue per available seat mile (RASM) is seen declining by 9% to 10% versus the prior outlook of a 9% to 11% decline.
In addition, capacity during the first quarter of Fiscal 2024 is expected to increase by 6% to 8%. However, Southwest has moderated its capacity goals beyond 2024. It now aims for a low-to-mid-single-digit year-over-year ASM growth, compared to the earlier target of mid-single-digit growth. Moreover, economic fuel costs for the fourth quarter are expected to hover between $3 and $3.10. Southwest earlier pegged this figure between $2.90 and $3.
Still, recent strong travel trends have prompted optimistic guidance updates among airlines. Delta (NYSE:DAL) expects revenue growth of about 20% for Fiscal Year 2023, while JetBlue (NASDAQ:JBLU) anticipates revenue growth of 4% to 5% for the full year.
What is the Future of LUV Stock?
This change of fortune has driven LUV shares nearly 32% higher over the past month. However, the Street has a Hold consensus rating on Southwest Airlines, and the average LUV price target of $26.92 implies a potential downside of 11.2% in the stock.
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