Leading U.S. low-cost carrier
Southwest Airlines Co.
) reported mixed fourth quarter and full-year 2012 results, owing
to contributions from the strategic steps taken by management and
better bookings, partially offset higher expenses associated with
wages as well as fuel.
The company's fourth quarter adjusted earnings were 9 cents per
share that slivered past the Zacks Consensus Estimate of 7 cents.
The quarter's results remained at the same level with that of the
Quarterly revenues moved up 1.6% year over year to $4,173 million
but missed the Zacks Consensus Estimate of $4,214 million. On an
annualized basis, Passenger and Freight revenues increased 1.9%
and 16.7%, respectively, while other revenues decreased 6.8%.
For full-year 2012, Southwest posted earnings of 56 cents per
share (surpassing our projection by 5.7% and increasing 30.2%
year over year), on revenues of $17,088 million (up 9.1% from the
Airlines traffic, measured in billions of revenue passenger
miles, slid 1.4% year over year to 24.8 billion in the fourth
quarter. Capacity or available seat miles fell 0.3% to 31.2
billion, while load factor (percentage of seats filled with
passengers) dipped 9 basis points year over year to 79.6%.
Passenger revenue per available seat mile (PRASM) inched up 2.3%
year over year.
Operating Expenses & Operating Income
For the fourth quarter, operating income decreased 18.6% to $136
million from the year-ago quarter. Total operating expenses,
excluding special items, increased 2.4% year over year to $4,037
million due to higher maintenance and airport costs. Fuel price
(economic) accounted for $3.32 per gallon, up from $3.29 in the
year-ago quarter. Consolidated unit cost or cost per available
seat mile (CASM), excluding fuel and special items, grew 5.8%.
At the end of 2012, Southwest had $2,970 million in cash and
short-term investments and $800 million in undrawn revolving
credit facilities. The company had long-term debt (including
current portion) of $3,154 million, representing
debt-to-capitalization ratio of 31.2%.
In 2012, Southwest generated operating cash flow of $2,064
million and capital expenditures were $1,348 million. The company
repurchased 46 million shares for approximately $400 million and
paid total dividends of $22 million. As of Dec 31, 2012, return
on invested capital (before taxes and excluding special items)
Based on current traffic trends, Southwest expects unit revenue
to grow again in first quarter 2013. The company also expects an
upward movement in the first quarter unit costs, excluding fuel,
profit sharing and special items. Fuel price (economic) is
estimated at approximately $3.30 per gallon.
With regard to its AirTran merger, the company remains on track
to generate net synergies of more than $400 million by 2013 on
Other Airline Stocks
Delta Air Lines
) reported fourth-quarter 2012 results on Jan 22, with adjusted
earnings of 28 cents coming on par with the Zacks Consensus
Estimate. The results, however, dropped 37.8% from the year-ago
adjusted profit of 45 cents. Revenues edged up 2% year over year
to $8.60 billion but fell marginally short of our projection of
United Continental Holdings Inc.
) has released its fourth quarter results today, while
JetBlue Airways Corporation
) will release the same on Jan 29.
Southwest currently holds a Zacks Rank #1, implying a short-term
Strong Buy rating. We expect the company to remain committed to
sustain its brand and operational excellence via its cost-cutting
measures, fleet rightsizing as well as the addition of new and
The company's Evolve retrofit program, steady capacity growth,
All-New Rapid Rewards and several steps to enhance ancillary
revenues will position it advantageously in the coming days.
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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