Earnings Preview: Southwest Airlines

Southwest Airlines Co. (LUV) is scheduled to report its Q2 2012 results on July 19, 2012, after the bell. The street expects EPS and revenue of $0.32 and $4.58B, respectively.

In this article I will recap the historical results of the company, its latest EPS estimates vs. surprises, the latest news from LUV and the news from its closest competitors.

Recent EPS Actuals vs. Estimates

The company has met or beaten analysts' estimates in the last three quarters. In the last quarter it reported ($0.02) loss per share, beating analyst estimates of ($0.05) loss.

The consensus EPS estimate is $0.32 based on 16 analysts' estimates, up from $0.15 a year ago. Revenue estimates are $4.58B, up from $4.14B a year ago. The median target price by analysts for the stock is $11.75.

Average recommendation: Overweight

Source: Marketwatch

Analyst Upgrades and Downgrades

• On June 27, 2012, Avondale Partners, LLC upgraded the company from Hold to Strong Buy.
• On June 20, 2012, Imperial Capital initiated In-line rating for the company.
• On April 3, 2012, Barclays upgraded the company from Equal Weight to Overweight.

Latest News

• On July 9, 2012, Southwest Airlines Co announced that the Company, together with its subsidiary, AirTran Airways, Inc., has reached an agreement with Delta Air Lines, Inc., and Boeing Capital Corp., to lease or sublease all 88 of AirTran's Boeing 717 aircraft to Delta.
• On May 16, 2012, Southwest Airlines announced that its Board of Directors, at its meeting declared an increase in the quarterly dividend and increased the Company's share repurchase authorization to $1 billion.
• On May 10, 2012, Southwest Airlines announced that it will begin service between Boston Logan and Nashville with one daily nonstop roundtrip flight starting August 12, 2012.
• On April 19, 2012, Southwest Airlines and Amadeus IT Group announced that they have entered into a joint contract for Amadeus' Altea reservations solution that would support the carrier's international service.
• On February 14, 2012, Southwest Airlines announced that it has reached an agreement with Southwest Airlines that will provide Egencia corporate clients with improved access to the carrier's content and functionality.

Competitors

Delta Air Lines (DAL), JetBlue Airways (JBLU), US Airways Group (LCC), and United Continental Holdings (UAL) are considered major competitors for Southwest Airlines and the table below provides the key metrics for these companies and the industry.

The chart below compares the stock price changes as a percentage for the selected companies and S&P 500 index for the last one year period.

(click to enlarge)

LUV data by YCharts

Competitors' Latest Development

• On July 11, 2012, US Airways announced non-stop service to five new communities from Washington, D.C.'s Reagan National Airport Augusta, Ga., Minneapolis, Minn., Fayetteville, Ark., Montreal and Toronto.
• On June 13, 2012, Reuters reported that Delta Air Lines Inc is set to close its deal to buy the Trainer, Pennsylvania, refinery on time later this month, allowing it to begin a long-delayed maintenance overhaul in early July.
• On June 13, 2012, Reuters reported that US Airways Group is hoping to file paperwork with U.S. antitrust regulators as early as July for a proposed merger with AMR Corp, the bankrupt parent of American Airlines.
• On June 4, 2012, Grupo Aeromexico SAB de CV announced that it has received from Delta Air Lines Inc. a USD65,000,000 as part of this carrier's investment in Mexico's flagship carrier's capital stock, thus strengthening its financial position, confirming its expansion project and creating the airline alliance in the Mexico-U.S. market.
• On May 31, 2012, Reuters reported that US Airways and private equity firm TPG Capital may team up to bid for American Airlines' parent, AMR Corp, according to people familiar with the discussions.
• On April 30, 2012, Delta Air Lines's Subsidiary announced that it has reached agreement with Phillips 66 to acquire the Trainer refinery complex south of Philadelphia.
• On April 25, 2012, Delta Air Lines announced that it expect the second quarter and fiscal 2012 will be not only solidly profitable but also a significant improvement over last year, despite higher fuel prices.
• On April 19, 2012, United Continental Holdings Inc announced that for the first quarter of 2012, expects to record special charges of $162 million.
• On April 16, 2012, United Continental Holdings Inc announced that John Rainey has been named Executive Vice President and Chief Financial Officer, succeeding Zane Rowe. Rainey most recently has been Senior Vice President of financial planning and analysis for United.
• On April 5, 2012, Reuters reported that Delta Air Lines is considering a bid for ConocoPhillips's idled 185,000 barrel per day refinery in Trainer, Pennsylvania. CNBC reported that Delta could bid as much as $100 million for the plant, which was idled last September due to depressed margins and weak demand.
• On March 1, 2012, Delta Air Lines announced that Paul A. Jacobson has been appointed to the position of senior Vice President and Chief Financial Officer (CFO), effective March 1, 2012.
• On February 22, 2012, Delta Air Lines announced expanded codeshare agreements with China Eastern and China Southern airlines, two of the carriers in the People's Republic of China, which will provide more options for customers traveling between the United States and China.
• On February 21, 2012, United Airlines, a wholly owned subsidiary of United Continental Holdings Inc, announced plans to launch daily, nonstop flights between its New York hub, Newark Liberty International Airport, and Istanbul, effective July 1, 2012, subject to government approval.
• On February 14, 2012, Orbitz Worldwide Inc announced that it has reached a multi-year agreement by which United Continental Holdings, Inc. will sell United and Continental flights on the Orbitz.com, CheapTickets.com and Orbitz for Business online travel sites.
• On January 19, 2012, United Continental Holdings Inc announced that it expects to record special charges of $247 million during the fourth quarter of 2011.

Technical Overview

The stock has a market capitalization of $7.25B and is currently trading at $9.44 with a 52 week range of $7.15 - $10.71. The stock's year-to-date performance has been 10.41%. It is currently trading above 20, 50 and 200 SMA.

Sources: Yahoo Finance, Google Finance, Marketwatch, Finviz, Reuters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.