Southwest Airlines (LUV) - Bull of the Day

By
A A A

We are upgrading our recommendation on Southwest Airlines Co. ( LUV ) to Outperform based on falling fuel prices and strong growth opportunities. The company reported lower year-over-year earnings in the first quarter but outpaced the Zacks Consensus Estimate. Fuel prices, the major threat to the company's profitability, have dropped, which has made airline operations less expensive.

This lower cost, along with the cost-cutting measures, would offset high maintenance costs associated with the fleet modernization program amid the ongoing market turmoil. Additionally, Southwest is poised to benefit from fleet rightsizing, the Evolve retrofit program, steady capacity growth, All-New Rapid Rewards and several ancillary revenues.

The AirTran merger will also provide additional synergies when integrated with the company's livery, starting this year. Hence, we have an Outperform rating with a target price of $11, based on 13.75x our earnings estimate for 2012.
 
SOUTHWEST AIR (LUV): Free Stock Analysis Report
 
To read this article on Zacks.com click here.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: LUV

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

79%

Most Active by Volume

71,556,842
  • $17.665 ▲ 0.77%
45,748,034
  • $25.57 ▲ 1.71%
45,719,062
  • $112.3566 ▼ 0.26%
43,322,672
  • $7.33 ▲ 2.23%
41,244,639
  • $7.12 ▲ 7.23%
38,593,470
  • $8.18 ▲ 7.49%
37,968,989
  • $9.9001 ▼ 1.69%
36,814,937
  • $36.575 ▼ 1.20%
As of 12/19/2014, 03:01 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com