Due to the airline company’s strong franchise, management team, balance sheet, and exposure to the rising tide in both leisure and corporate travel, as well as specialized catalysts like the MAX rollout, credit card agreement, and GDS integration, Southwest Airlines Co. (NYSE:LUV) is positioned as Morgan Stanley’s top pick in the airline sector. LUV stock, in the firm’s opinion, will stand out as investors turn back to the aviation industry.
LUV stock outlook
Morgan Stanley gave Southwest Airlines (LUV) a strong rating after the company’s Q3 earnings report and conference call last week, both of which were good. On the call, LUV management said they were confident that their operational reliability was back on track. This gave them room to push the top line up and the CASMxF down through 2023, despite a weak 3Q print and an in-line 4Q guide.
According to LUV’s 2023 guidance, there will be better cost control and sales visibility, as well as more visibility beyond a three-month horizon. LUV stock has the ninth-highest quantitative score in the global airline industry, and its Seeking Alpha Quant Rating is flashing Buy.
Demand for air travel: stable through 2023 or set to decline?
One theme pervaded all of the major airlines’ earnings presentations in October: the consumer is still spending money on travel. In fact, many airlines said that the number of passengers had returned to or was very close to what it was before the pandemic. Due to the higher cost of travel, this often leads to more sales and profits at the end of 2022 than in 2019. Shares of the US Global Jets ETF (NYSEARCA:JETS) have increased by more than 11% over the course of the past month as a result of encouraging news from major airlines and expectations for steady demand.
Delta Air Lines CEO Ed Bastian said on October 13 during earnings season that “the travel recovery continues as consumers spend more on experiences and demand for business and international travel grows.”
Featured Image – Megapixl © JOlsonPhotos