Is a Beat in Store for Southwest Airlines’ (LUV) Q2 Earnings? – July 25, 2022

Southwest Airlines (LUV Free Report) is scheduled to report second-quarter 2022 results on Jul 28, before market open.

The Zacks Consensus Estimate for Southwest Airlines’ second-quarter earnings has increased 18.56% in the past 60 days. LUV has an impressive surprise history, with its earnings having outperformed the Zacks Consensus Estimate in three of the last four quarters, missing the same in one.

Let’s see how things are shaping up for Southwest Airlines this earnings season.

With improved air-travel demand, passenger revenues are expected to have increased significantly in the to-be-reported quarter from the year-ago period’s actuals. The Zacks Consensus Estimate for second-quarter passenger revenues indicates more than a 100% jump from the year-ago reported quarter’s reading. Passenger revenues are likely to have improved even on a sequential basis. The consensus mark for passenger revenues hints at a 44.8% improvement from the first-quarter 2022 reported number.

Owing to the betterment in air-travel demand, LUV anticipates second-quarter load factor (% of seats filled with passengers) in the range of 85-87%. Operating revenues are estimated to increase 12-15% in the second quarter from the 2019 level. However, reduced capacity, mainly due to staffing woes, is pushing up unit costs for Southwest Airlines. This might get reflected in LUV’s bottom-line results.

The Zacks Consensus Estimate for cost per available seat miles (CASM or unit costs), excluding fuel and oil expenses, profit sharing and special items, indicates an approximate 40.9% increase from the first-quarter 2022 reported number. Southwest Airlines estimates first-quarter 2022 CASM, excluding fuel and oil expenses, profit sharing and special items, to increase 14-18% from the comparable period’s level in 2019.

Moreover, rising fuel prices, thanks to the Russia-Ukraine war, are likely to have dented LUV’s bottom line in the June quarter. The Zacks Consensus Estimate for second-quarter fuel costs per gallon (inclusive of fuel tax: economic) suggests a 38.3% rise from the first-quarter 2022 reported number.

Earnings Whispers

The proven Zacks model predicts an earnings beat for Southwest Airlines this time around. The combination of a positive Earnings ESP and a Zacks Rank # 1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is the case here. You can see the complete list of today’s Zacks # 1 Rank stocks here.

Earnings ESP: Southwest Airlines has an Earnings ESP of + 4.64% as the Most Accurate Estimate is pegged at $ 1.21, 6 cents above the Zacks Consensus Estimate of $ 1.15. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Southwest Airlines carries a Zacks Rank # 3 presently.

Highlights of Q1 Earnings

Southwest Airlines incurred a loss (excluding 15 cents from non-recurring items) of 32 cents in the first quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of 34 cents. The amount of loss also narrowed 81.4% year over year. Operating revenues of $ 4694 million outperformed the Zacks Consensus Estimate of $ 4,663.8 million and also jumped more than 100% year over year.

Other Stocks to Consider

Here are a few other stocks worth considering from the broader Zacks Transportation sector, as our model shows that these have the right combination of elements to beat on second-quarter 2022 earnings:

CH Robinson Worldwide (CHRW Free Report) has an Earnings ESP of + 5.24% and a Zacks Rank # 2. CHRW will release results on Jul 27.

CH Robinson has an expected earnings growth rate of 16.6% for the current year. CHRW delivered a trailing four-quarter earnings surprise of 17.1%, on average.

CHRW has a long-term earnings growth rate of 9%.

Kirby (KEX Free Report) has an Earnings ESP of + 0.70% and a Zacks Rank of 2. KEX will release results on Jul 28.

Kirby has an expected earnings growth rate of 282.14% for the current year. KEX delivered a trailing four-quarter earnings surprise of 7.7%, on average.

KEX has a long-term earnings growth rate of 12%.

Copa Holdings (CPA Free Report) has an Earnings ESP of + 0.47% and a Zacks Rank of 3. CPA will release results on Aug 3.

CPA has an impressive surprise history, with its earnings having outperformed the Zacks Consensus Estimate in each of the last four quarters, the average being 185.8%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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