Southwest Airlines LUV is scheduled to report fourth-quarter 2021 results on Jan 27.
The company has incurred losses for seven consecutive quarters as the pandemic continues to dent air-travel demand.
Let’s see how things are shaping up for Southwest this earnings season.
Factors to Note
Strong Thanksgiving holiday travel period is expected to have boosted Southwest’s passenger revenues in the fourth quarter. The Zacks Consensus Estimate for passenger revenues in the fourth quarter indicates a 6.4% increase from the third-quarter 2021 reported figure. The company expects profits for the fourth quarter on the back of strong holiday travel demand, higher fares and benefits from the co-brand credit card agreement with Chase.
However, with air-travel demand continuing to be below the pre-pandemic levels despite improving, Southwest’s passenger revenues are expected to have declined from the 2019 level. For the fourth quarter, the company anticipates operating revenues to decline 10-15% from the comparable period’s figure in 2019.
With fuel costs comprising a major chunk of airline expenditures, escalating fuel prices might have hurt Southwest’s bottom line in the fourth quarter. The Zacks Consensus Estimate for fuel costs per gallon, including fuel tax (economic), hints at an 8.8% increase from the sequential quarter’s reported figure of $2.04. For the fourth quarter, the company estimates economic fuel costs per gallon to be between $2.15 and $2.25.
Southwest Airlines Co. Price and EPS Surprise
Southwest Airlines Co. price-eps-surprise | Southwest Airlines Co. Quote
Earnings Whispers
The proven Zacks model does not conclusively predict an earnings beat for Southwest this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, this is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP: Southwest has an Earnings ESP of +112.90% as the Most Accurate Estimate is pegged at 12 cents, while the Zacks Consensus Estimate is poised at 6 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Southwest carries a Zacks Rank #4 (Sell).
Highlights of Q3 Earnings
Southwest incurred an adjusted loss of 23 cents per share in the third quarter of 2021, narrower than the Zacks Consensus Estimate of a loss of 27 cents. Operating revenues of $4,679 million outperformed the Zacks Consensus Estimate of $4,581.5 million and also jumped more than 100% year over year with significant increase in passenger revenues. However, the same declined 17% from the third-quarter 2019 reading.
Stocks to Consider
Investors interested in the broader Transportation sector may consider C.H. Robinson Worldwide CHRW and Landstar System LSTR, as these stocks possess the right combination of elements to beat on earnings this reporting cycle.
C.H. Robinson currently has an Earnings ESP of +4.79% and a Zacks Rank #3. The company will report fourth-quarter 2021 results on Feb 2.
Favorable pricing and higher volumes, owing to improved freight market conditions, are expected to have aided C.H. Robinson’s fourth-quarter performance.
Landstar System has an Earnings ESP of +1.56% and is Zacks #3 Ranked presently. The company will release fourth-quarter 2021 results on Jan 26.
Landstar’s fourth-quarter performance is expected to have benefited from higher truck rates and strong freight demand.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Southwest Airlines Co. (LUV): Free Stock Analysis Report
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Landstar System, Inc. (LSTR): Free Stock Analysis Report
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