LUV Stock (NYSE:LUV)
LUV stock (NYSE:LUV) is trading more than 45% below its year-ago highs, yet the firm recently surpassed its quarterly earnings record in the second quarter of this year.
Southwest Airlines (LUV) issued an investor report last week, noting robust leisure travel demand and hints that corporate travel may increase.
So, is it time to purchase this LUV stock (NYSE:LUV) on the cheap? Let’s take a deeper look at Southwest and its present course.
The Biggest Low-cost Airline in the World.
Southwest is the world’s biggest low-cost airline in terms of fleet size. The firm operates 726 aircraft and has the world’s fourth-largest fleet, after only American Airlines, Delta Air Lines, and United Airlines.
Air travel demand increased dramatically this summer, with Southwest reporting a “spike in leisure demand, particularly in June.” The firm reached a new record for quarterly earnings in Q2 as a consequence of strong reservations and packed flights.
On a brighter note for the whole airline sector, San Diego International Airport revealed last month that it served over 2 million passengers in June for the first time since 2019. This equates to an 83% recovery from pre-pandemic levels.
Market Evaluation of LUV Stock
While leisure demand has increased, Southwest’s commercial revenue remains much lower than in 2019. The company’s July and August business revenue decreased by 26% and 32%, respectively, compared to 2019.
Southwest anticipates its third-quarter business revenue to be substantially lower than previously estimated. The company’s earlier prediction was 17% to 21% lower than Q3 2019 levels, but that has recently been lowered to 26% to 28%.
The leisure market is doing better than projected. Despite lower-than-expected business demand, Southwest made up for it with higher-than-expected leisure reservations, with robust demand lasting through the Labor Day vacation. In the third quarter, leisure revenue outperformed estimates.
Following record quarterly earnings in Q2, the firm anticipates “strong profitability” for the year’s balance. Though it is still too early to tell, Southwest expects its current leisure boom to continue until the fourth quarter. With a better understanding of how the year would end, the business changed its annual outlook to a 9% to 11% increase from 2019 levels (predicted initially at 8% to 12%). All of these showing a positive outlook for LUV stock (NYSE:LUV)
Southwest also indicated that corporate travel has recently improved, with business revenue trends climbing 8% to 10% from August to September. Delta also saw an uptick in business travel, claiming a surge in post-Labor Day corporate reservations.
Demand may ratchet up fast, as seen by the resurgence in leisure travel. While leisure travel has been strong, if Southwest can recoup some of its pre-pandemic business travel income, LUV stock (NYSE:LUV) might make a strong recovery soon.
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