Southwest shares close higher on Wednesday, air carrier reiterates unit revenue forecast for Q3

Southwest Airlines Co (LUV) said on Wednesday that it had continued to experience solid demand and strong passenger yield trends during the third quarter from a year ago. Therefore, the air carrier reiterated its operating revenue per available seat mile (unit revenue) forecast for the third quarter, expecting 3% to 5% year-on-year growth.

Shares of Southwest Airlines closed higher for the ninth time in the past twelve trading sessions in New York on Wednesday. The stock went up 0.90% ($0.50) to $56.23, after touching an intraday high at $56.49, or a price level not seen since March 1st ($56.58).

Shares of Southwest Airlines Company have risen 20.98% so far in 2019 compared with a 19.94% gain for the benchmark index, S&P 500 (SPX).

In 2018, Southwest Airlines Co’s stock went down 28.98%, thus, it underperformed the S&P 500, which registered a 6.24% loss.

Southwest said it now expected between 8% and 10% growth of its operating costs per available seat mile (unit costs), excluding fuel and oil expense and profit-sharing expense, during the third quarter. Previously, the company had expected unit costs to increase between 9% and 11% year-on-year. The downward revision resulted from the shifting of maintenance and technology expenses from third quarter into fourth quarter as well as due to continued cost control.

Southwest maintained its fuel cost forecast for the third quarter, expecting a range of $2.05 to $2.15 per gallon.

At the same time, the air carrier still expects available seat miles per gallon (fuel efficiency) to drop between 1% and 2% year-on-year during the third quarter, mostly because of the removal of its most fuel-efficient aircraft from its flight schedule – the globally grounded 737 MAX.

Southwest also expects its third-quarter available seat miles (capacity) to drop about 3% year-on-year compared with a previously expected decrease of between 2% and 3% year-on-year.

Analyst stock price forecast and recommendation

According to CNN Money, the 18 analysts, offering 12-month forecasts regarding Southwest Airlines’ stock price, have a median target of $58.50, with a high estimate of $75.00 and a low estimate of $46.00. The median estimate represents a 4.04% upside compared to the closing price of $56.23 on September 18th.

The same media also reported that at least 10 out of 21 surveyed investment analysts had rated Southwest Airlines’ stock as “Hold”, while 8 – as “Buy”. On the other hand, 2 analysts had recommended selling the stock.