LUV's Q2 revenues are likely to benefit from resilient travel demand and improved pricing power, with rising labor costs acting as the key challenge.
Southwest (LUV) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
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Southwest Airlines (LUV) is rated 'Hold' with a $44/share price target, reflecting transformation upside but significant fuel and execution risks. LUV's 1Q26 results validated cost management and fee adoption strategies, but fuel price volatility and lack of hedging threaten full-year EPS targets. Management's $4/share 2026 EPS guidance appears optimistic; my revised estimate is $2.9/share, accounting for higher jet fuel costs and execution risks.
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Southwest Airlines is initiated with a "Buy" rating, citing a turnaround, strong forward earnings trends, and favorable macro tailwinds. LUV expects EPS to more than triple to $2.96 this year, with out-year earnings potentially exceeding $4.50 and normalized growth by FY 2028. Valuation appears attractive; applying a low-teens P/E to $4.50 normalized EPS suggests shares could reach $60, supported by strong travel trends and lower energy costs.
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While markets often view large-scale buyback authorizations as positives in and of themselves, authorizations are just one part of the buyback equation. Unlike dividends, which companies must pay after declaring, there is no hard requirement for companies to spend the buyback capacity they authorize.
Southwest Airlines Co. (LUV) Presents at Bernstein 42nd Annual Strategic Decisions Conference Transcript
Southwest Airlines revised its "customer of size" policy to offer free extra seats. The change comes after backlash over the way its previous policy was enforced.