Southwest Airlines Stock Rises 8.34% on Tuesday's Trading: Here's How

Shares of Southwest Airlines Co. (LUV) performed well on March 11, 2025, closing the trading session at $30.53 per share, up 8.34% from the previous day's closing. The upside was due to the company’s strategic growth plans and financial targets, which were revealed along with the share buyback announcement. These positives are likely to have offset the weaker demand scenario witnessed in the first-quarter 2025 guidance.Let's delve deeper.LUV’s Q1 OutlookFirst-quarter capacity or available seat miles (ASMs) are now estimated to decline 2% from the year-ago reported figure. The prior guidance implied a year-over-year decline of 2-3%.For second quarter 2025, LUV continues to expect capacity to increase in the range of 1-2% on a year-over-year basis.LUV now anticipates its first-quarter 2025 revenue per available seat mile (RASM or unit revenues) to increase by 2% to 4% on a year-over-year basis. This marks a downside from the previous forecast of 5-7%. The downside in revenue performance was due to the softness in bookings and demand trends on the back of the increased macro uncertainty, higher-than-expected completion factor, lesser government travel, and a higher-than-expected impact from the California wildfires.ASMs per gallon for first quarter is now expected between 82 and 83 (prior view: 81-83).Economic fuel cost per gallon for first quarter is now expected in the range of $2.35 to $2.45 (prior view: $2.50 to $2.60). Lower fuel cost 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, are now expected to increase 6% in the first quarter from the comparable period in 2024. This marks a downside from the prior view of 7-9% year-over-year growth. CASMex expectations have reduced due to increased capacity and lower than expected salary, wages, benefits, maintenance, and other expenses. LUV remains focused on boosting efficiencies to offset overall inflationary cost pressures and achieve its cost initiative.Interest expenses are still expected to be $45 million in the first quarter.Strategic Growth Plans of LUVApart from issuing guidance, LUV also laid out an impressive roadmap for its growth and updated its share buyback plans. LUV has already completed share repurchases worth $1 billion from its previously authorized $2.5 billion share repurchase program. The company anticipates completing the remaining $1.5 billion share buyback in July 2025 and plans to accelerate its $2.5 billion share repurchase program.LUV continues to work on its revenue management actions, which include network optimization and capacity moderation, as well as marketing and distribution evolution. To this end, the company’s progress so far includes offering assigned seating and extra legroom options, a co-brand agreement with Chase (which offers enhanced Cardmember benefits and aid multi-year financial targets), an airline partnership with Icelandair (which began on Feb. 13, 2025) and completion of short-term sale-leaseback transaction for 36 737-800 aircraft.The latest revenue initiatives taken up by LUV include an updated policy on bag fees effective on or after May 28, 2025, wherein LUV will continue to offer two free checked bags to Rapid Rewards A-List preferred members and customers traveling on business select fares and one free checked bag to A-List members and other select customers. LUV will sponsor one checked bag for Rapid Rewards Credit Cardmembers. Customers not entitled to these free bag options will have to pay for their first and second checked bags (as per the weight and size conditions). This was followed by the optimization of loyalty programs on both high-demand and low-demand flights and the expansion of distribution channels through online travel agencies like Expedia.This Zacks Rank #3 (Hold) company is highly optimistic about these aforementioned plans to boost revenue growth and increase the customer base by retaining the older ones and attracting newer ones. These are expected to increase LUV’s EBIT contribution in 2025 and 2026. LUV also announced that it is doubling its 2027 cost reduction target to exceed $1 billion and will end its fuel hedging program.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Bob Jordan, president, chief executive officer, & vice chairman of LUV’s board of directors, stated, "We have tremendous opportunity to meet current and future Customer needs, attract new Customer segments we don't compete for today, and return to the levels of profitability that both we and our Shareholders expect. We will do all this while remaining focused on what's made us strong, our People and the authentic, friendly, and award-winning Customer Service only they can provide."Updated Q1 View of Other Airline CompaniesIn addition to LUV, Delta Air Lines, Inc. (DAL), American Airlines (AAL) and JetBlue Airways Corporation JBLU have also provided updated first-quarter 2025 guidance, citing economic uncertainties and the resultant reduction in travel demand.Delta Air LinesDAL has lowered its first-quarter 2025 adjusted earnings per share guidance (EPS) to the range of 30-50 cents from the previously guided range of 70 cents-$1 per share. The Zacks Consensus Estimate for first-quarter EPS is pegged at 84 cents.The adjusted operating margin in the March quarter is now expected to be in the range of 4-5%, which is lower than the prior guided range of 6-8%.Management has also reduced first-quarter 2025 total revenues (adjusted) to increase in the 3-4% band from first-quarter 2024 actuals. The updated revenue outlook marks a downside from the previous expectation of 7-9% year-over-year growth. The Zacks Consensus Estimate for first-quarter 2025 revenues indicates a year-over-year increase of 4.4%.The aforesaid disappointing guidance came on the back of the recent reduction in consumer and corporate confidence, which was driven by increased macro uncertainty. This led to softness in domestic demand.American AirlinesAAL now expects a loss per share of 60-80 cents in the first quarter of 2025 compared with the prior expected loss of 20-40 cents. First-quarter total revenues are now anticipated to be approximately flat on a year-over-year basis. This marks a downfall from the prior expectation of 3-5% year-over-year growth.The aforesaid disappointing guidance came on the back of the softness in the domestic leisure segment (primarily in March), coupled with the plane mishap of AAL Flight 5342 (wherein the AAL regional jet collided with a U.S. Army helicopter in Washington, DC, on Jan. 29, leading to the death of all 64 people on board. This was the first major commercial airline crash since 2009).System capacity is still estimated to be either flat or decrease up to 2% from first-quarter 2024 levels. Cost per available seat miles (adjusted) in the March quarter is still expected to increase in high-single digits from first-quarter 2024 actuals.JetBlue AirwaysJBLU also updated its first-quarter 2025 guidance citing mixed macroeconomic indicators and weather-related disruptions during the first two months of 2025 (specifically in February) effecting travel demand.For first-quarter 2025, capacity is now anticipated to decline in the 4-5% band (prior view: down 2-5% band).RASM is still forecasted to either decline 0.5% or increase 3.5% from first-quarter 2024 actuals. CASM, excluding fuel and special items, is still predicted to climb 8-10%.The average fuel cost per gallon is now estimated to be between $2.55 and $2.65, down from the prior guided range of $2.65-$2.80. Capital expenditures are now expected to be roughly $215 million (prior view: $270 million).5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Delta Air Lines, Inc. (DAL): Free Stock Analysis Report Southwest Airlines Co. (LUV): Free Stock Analysis Report JetBlue Airways Corporation (JBLU): Free Stock Analysis Report American Airlines Group Inc. (AAL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks