2013 was an amazing year for the often-overlooked airline
industry, as oil prices remained stable and demand for travel
picked up. It also didn't hurt that the broad transportation
industry-a highly cyclical sector-was leading the huge market
recovery last year.
Yet with such incredible gains, some might be dialing back their
exposure to this corner of the market on valuation concerns. While
this might be a good strategy overall, you could miss out on some
companies which appear well positioned for further gains this year
in the space, such as
Southwest Airlines (
Southwest Airlines in Focus
Southwest Airlines has become a major discount carrier in the
United States, with operations spanning the continental U.S. And
with the company's acquisition of AirTran, LUV has gained a
foothold in international markets, and it appears as though this
will only increase in the coming years.
Thanks to these expansion opportunities, and the generally positive
reputation of Southwest Airlines, it does seem as though there is
more room to run for LUV in the near future. This is especially
true after looking at the December traffic numbers for the airline
Southwest reported that its available seat miles grew 3.4%, while
passenger revenue per available seat mile increased
as much as 15%
. This was great news-and it easily beat competitors and their
gains-which has prompted many analysts to raise their estimates for
LUV's stock as of late.
Analysts seem to be pretty positive on LUV's growth prospects, as
the firm is projected to show 87% growth for the current year, and
just over 18% for next year too. Estimates have also been rising
very recently, suggesting there is still time to get in on this
After all, in just the past week, three estimates have gone higher
for both the current quarter and the current year, compared to zero
lower. This has helped to push the consensus marginally higher as
of late, suggesting that analysts are still bullish on the
company's prospects, even with the incredible run in 2013.
And, best of all, if you are worried about LUV hitting these lofty
estimates, the company has shown a proven track record at earnings
season. The stock has only missed once in the past two years, so it
should have no trouble soaring past estimates once again.
Thanks to these factors, LUV has earned a Zacks Rank #1 (Strong
Buy), meaning we are looking for more strength from this name in
2014. Plus, the Industry rank for airlines is currently just
outside the top 10%, so it is hard not to like this top name in
this solid sector.
Airlines had a great 2013, and many companies in this space led the
market higher. One such name that did surprisingly well in this
space is Southwest Airlines.
While the company did well last year, 2014 could be another banner
year for the company thanks to the strong trends that are still in
place in this sector. So if you are looking for a top pick in a
surging industry, consider LUV as nothing looks to ground this
quickly growing company any time soon.
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Author is long LUV
SOUTHWEST AIR (LUV): Free Stock Analysis Report
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