Southwest Airlines Co.
) reported strong fourth quarter and full-year 2013 results,
owing to contributions from the strategic steps taken by
management and better bookings. The partial dampeners were higher
expenses associated with fuel, maintenance and integration
The company reported record fourth quarter earnings of 33
cents per share that surpassed the Zacks Consensus Estimate of 28
cents. The results were way above the prior-year quarter earnings
of 9 cents.
Quarterly revenues moved up 6.1% year over year to $4,428
million and were ahead of the Zacks Consensus Estimate of $4,374
million. On an annualized basis, Passenger revenues increased
6.5% while Freight and Other revenues decreased 2.4% and 1.0%
For full-year 2013, Southwest posted earnings of $1.12 per
share (surpassing our projection by 3.7% and increasing 100.0%
year over year) on revenues of $17,699 million (up 3.6% from the
Airlines traffic, measured in billions of revenue passenger
miles moved up by 1.1% year over year to 25.6 billion in the
fourth quarter. Capacity or available seat miles increased 2.2%
to 31.9 billion, while load factor (percentage of seats filled
with passengers) leaped 80 basis points year over year to 80.4%.
Passenger revenue per available seat mile (PRASM) increased 4.2%
year over year.
Operating Expenses & Operating Income
For the fourth quarter, operating income increased to $386
million from $91.0 million in the year-ago quarter. Total
operating expenses, decreased 1% year over year to $4,042 million
due to lower fuel and maintenance costs. Fuel price (economic)
accounted for $3.05 per gallon, down from $3.32 in the year-ago
quarter. Consolidated unit cost or cost per available seat mile
(CASM), excluding fuel and special items, grew 1.5%.
At the end of 2013, Southwest had $3,152 million in cash and
short-term investments and $1 billion in undrawn revolving credit
facilities. The company had long-term debt (including current
portion) of $2,820 million, representing debt-to-capitalization
ratio of 27.8%.
In 2013, Southwest generated operating cash flow of $2,490
million and capital expenditures were $1,447 million. The company
repurchased 38 million shares for approximately $540 million and
paid total dividends of $71 million. As of Dec 31, 2013, return
on invested capital (before taxes and excluding special items)
Based on current revenue and booking trends, Southwest expects
unit revenue to grow again in first quarter 2014. The company
also expects an upward movement in first quarter unit costs,
excluding fuel, profit sharing and special items. Fuel price
(economic) is estimated at approximately $3.05 to $3.10 per
Other Airline Stocks
Delta Air Lines Inc.
) reported fourth-quarter 2013 results on Jan 21, with adjusted
earnings of 65 cents coming ahead of the Zacks Consensus Estimate
of 63 cents. The bottom line leaped 142.1% from the year-ago
adjusted profit of 28 cents.
Other carriers like
American Airlines Group Inc.
JetBlue Airways Corp.
) will release fourth quarter financial results on Jan 28 and Jan
Southwest currently holds a Zacks Rank #1, implying a Strong
Buy rating. We believe that the company will benefit from the
implementation of a number of strategies to increase revenues and
reduce costs over the next three years. These include efficiency
in operations, introduction of various customer friendly
programs, network optimization and capacity management.
Nevertheless, high non-fuel operating costs, a new advertising
policy along with intense competition and heavy investments are
expected to limit the company's earnings potential.
AMER AIRLINES (AAL): Free Stock Analysis
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
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