Southwest Airlines (LUV) Stock Declines 22% YTD: Here's Why

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Shares of Southwest Airlines Co.LUV have lost 22.2% so far this year, underperforming its industry 's decline of 11.1%.

Why the Lackluster Price Performance?

Southwest Airlines has faced multiple headwinds this year. In April, a passenger on its flight (1380) died due to the mid-air engine explosion. This incident adversely impacted travel demand at Southwest Airlines, resulting in soft bookings.

Moreover, Southwest Airlines, like its fellow-airline operators Delta Air Lines DAL , American Airlines Group Inc. AAL and JetBlue Airways Corp. JBLU , has been hit hard by the rise in oil prices .

This low-cost carrier issued a lackluster view for second-quarter unit revenues due to weak bookings and rising fuel costs. The company expects operating revenue per available seat mile (RASM) to decline around 3% year over year (the earlier guidance had called for a decline in the 1-3% range).

With fuel prices on the rise, the Dallas-based carrier trimmed its capacity (measured in available seat mile or ASMs) growth view. It now anticipates second-quarter capacity to increase approximately 3.5%. Earlier, the company had called for 3.5-4% growth in the metric.

Additionally, the company projects ASM in the low 4% range compared with its prior forecast in the low 5% range. Also, for the latter half of the year, ASM is anticipated to expand approximately 6% year over year, lower than its earlier view of a rise in the low 7% range.

Other Unfavorable Readings

The Zacks Consensus Estimate for second-quarter and full-year 2018 earnings moved south 14.7% and 9%, respectively, in the last 60 days. This reflects investor's pessimism surrounding the stock.

Furthermore, the stock has a VGM Score of C, which highlights its unattractiveness. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

Undoubtedly, the above negatives substantiate the company's Zacks Rank #5 (Strong Sell).

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

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

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