Southwest Airlines (LUV) Lifted to Buy at Zacks Investment Research

Zacks Investment Research upgraded shares of Southwest Airlines (NYSE:LUV) from a hold rating to a buy rating in a research report report published on Friday. The firm currently has $55.00 price target on the airline’s stock.

According to Zacks, “Fuel costs have been on a downward trend lately. In fact, oil prices registered their steepest monthly drop, in a decade, in November. This bodes well for airline stocks including Southwest. Taking advantage of the low oil price scenario, Southwest trimmed its forecast for the fourth quarter of 2018. Detailed results will be out on Jan 24. The Zacks Consensus Estimate for fourth-quarter earnings increased 1.9% over the last 60 days. This highlights the positivity surrounding the stock. Moreover, the carrier's efforts to reward shareholders are impressive. Furthermore, efforts to modernize its fleet are praiseworthy. Southwest is constantly adding more efficient planes to its fleet and removing outdated ones. However, capacity-related woes also do not bode well for Southwest. In fact, load factor has declined for eight consecutive months due to capacity overexpansion. Fourth-quarter capacity is likely to expand between 6% and 6.5%.”

LUV has been the subject of several other research reports. JPMorgan Chase & Co. cut shares of Southwest Airlines from a neutral rating to an underweight rating and reduced their target price for the stock from $63.00 to $52.00 in a report on Tuesday, October 30th. Raymond James reduced their target price on shares of Southwest Airlines from $68.00 to $60.00 and set an outperform rating for the company in a report on Friday, October 26th. Morgan Stanley set a $68.00 target price on shares of Southwest Airlines and gave the stock a buy rating in a report on Friday, October 5th. Citigroup increased their target price on shares of Southwest Airlines from $59.00 to $62.00 and gave the stock a buy rating in a report on Thursday, November 29th. Finally, Susquehanna Bancshares started coverage on shares of Southwest Airlines in a research note on Wednesday, November 28th. They issued a neutral rating and a $56.00 price target for the company. One research analyst has rated the stock with a sell rating, seven have assigned a hold rating and fourteen have assigned a buy rating to the company. Southwest Airlines currently has an average rating of Buy and an average price target of $61.56.

Shares of LUV stock opened at $48.52 on Friday. Southwest Airlines has a 1 year low of $44.28 and a 1 year high of $66.52. The company has a market cap of $27.60 billion, a PE ratio of 13.86, a P/E/G ratio of 0.92 and a beta of 1.31. The company has a current ratio of 0.71, a quick ratio of 0.65 and a debt-to-equity ratio of 0.47.

Southwest Airlines (NYSE:LUV) last announced its earnings results on Thursday, October 25th. The airline reported $1.08 EPS for the quarter, topping the Thomson Reuters’ consensus estimate of $1.06 by $0.02. Southwest Airlines had a net margin of 17.18% and a return on equity of 22.27%. The business had revenue of $5.58 billion during the quarter, compared to analysts’ expectations of $5.56 billion. During the same quarter in the prior year, the company posted $0.88 earnings per share. Research analysts predict that Southwest Airlines will post 4.13 EPS for the current year.

The business also recently disclosed a quarterly dividend, which was paid on Wednesday, January 2nd. Stockholders of record on Wednesday, December 5th were given a $0.16 dividend. This represents a $0.64 annualized dividend and a dividend yield of 1.32%. The ex-dividend date was Tuesday, December 4th. Southwest Airlines’s payout ratio is presently 18.29%.

In related news, Director John T. Montford sold 980 shares of the firm’s stock in a transaction dated Wednesday, December 12th. The shares were sold at an average price of $51.27, for a total transaction of $50,244.60. Following the transaction, the director now directly owns 20,983 shares of the company’s stock, valued at $1,075,798.41. The transaction was disclosed in a legal filing with the SEC, which is available through this hyperlink. Also, Director John T. Montford sold 956 shares of the firm’s stock in a transaction dated Monday, November 19th. The stock was sold at an average price of $52.35, for a total transaction of $50,046.60. The disclosure for this sale can be found here. 0.23% of the stock is owned by corporate insiders.

A number of large investors have recently added to or reduced their stakes in the stock. Primecap Management Co. CA increased its position in Southwest Airlines by 0.3% during the third quarter. Primecap Management Co. CA now owns 73,955,888 shares of the airline’s stock worth $4,618,545,000 after acquiring an additional 241,557 shares during the period. FMR LLC increased its position in Southwest Airlines by 11.8% during the third quarter. FMR LLC now owns 12,725,686 shares of the airline’s stock worth $794,719,000 after acquiring an additional 1,343,228 shares during the period. AQR Capital Management LLC increased its position in Southwest Airlines by 1.4% during the third quarter. AQR Capital Management LLC now owns 5,195,142 shares of the airline’s stock worth $324,436,000 after acquiring an additional 71,503 shares during the period. TIAA CREF Investment Management LLC increased its position in Southwest Airlines by 110.8% during the third quarter. TIAA CREF Investment Management LLC now owns 3,496,061 shares of the airline’s stock worth $218,329,000 after acquiring an additional 1,837,517 shares during the period. Finally, Morgan Stanley increased its position in Southwest Airlines by 37.8% during the second quarter. Morgan Stanley now owns 3,167,424 shares of the airline’s stock worth $161,158,000 after acquiring an additional 868,643 shares during the period. 79.43% of the stock is currently owned by institutional investors and hedge funds.

About Southwest Airlines

Southwest Airlines Co operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2017, the company operated a total of 706 Boeing 737 aircraft; and served 100 destinations in 40 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.

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