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Will Southwest Airlines (LUV) Earnings Surprise in Q3?

Southwest Airlines Co.LUV is set to release its third-quarter 2015 results before the opening bell on Oct 22.

Factors at Play

Southwest Airlines continues to benefit from the present slump in fuel prices. Moreover, the company's fleet restructuring initiatives, introduction of services to international destinations and capacity management are likely to propel growth while moving ahead. In addition, the successful integration of AirTran is likely to boost Southwest Airlines' operational and financial performance.

However, stiff competition from low-cost carriers as well as major airlines that have slashed air fares in order to draw customers may impact the company's profits.

Earnings Whispers

Our proven model does not conclusively show that Southwest Airlines is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or at least 3 for this to happen. That is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for the company stands at -1.09% as the Most Accurate estimate is 91 cents while the Zacks Consensus Estimate is 92 cents.

Zacks Rank: Southwest Airlines carries a Zacks Rank #2 (Buy). However, the company's negative ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

American Airlines Group Inc. AAL with an earnings ESP of +1.48% and a Zacks Rank #2.

Virgin America Inc. VA has an earnings ESP of +6.37% and a Zacks Rank #1 (Strong Buy).

United Continental Holdings, Inc. UAL has an earnings ESP of +1.56% and a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SOUTHWEST AIR (LUV): Free Stock Analysis Report

UNITED CONT HLD (UAL): Free Stock Analysis Report

AMER AIRLINES (AAL): Free Stock Analysis Report

VIRGIN AMERICA (VA): Free Stock Analysis Report

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Zacks Investment Research

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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