Southwest Airlines (LUV) Beats on Q1 Earnings & Revenues

Low cost U.S. carrier Southwest Airlines Co. LUV reported first-quarter 2016 results wherein both the top and the bottom line surpassed the Zacks Consensus Estimate.

Southwest Airlines reported earnings of 88 cents per share, outpacing the Zacks Consensus Estimate of 84 cents. Quarterly revenues moved up 9.3% year over year to $4,826 million, steering past the Zacks Consensus Estimate of $4,818 million. On a year-over-year basis, Passenger and Other revenues increased 5.3% and 101%, respectively, while Freight revenues dropped 4.5%.
 

Southwest Airlines Company (LUV) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Operating Statistics

Airline traffic, measured in billions of revenue passenger miles, increased 9.9% year over year to 28.41 billion in the quarter under review. Capacity or available seat miles increased 9.2% to 35.3 billion, while load factor (percentage of seats filled by passengers) stood at 80.5% compared with 80.1% in the year-ago quarter. Meanwhile, passenger revenue per available seat mile (PRASM) fell 3.6% year over year to 12.47 cents.

Operating Expenses & Income

In the first quarter of 2016, adjusted operating income came in at $944 million, up 21% year over year mainly buoyed by a decline in fuel costs. Total adjusted operating expenses increased 6.8% year over year to $3,882 million. Fuel price (economic) stood at $1.78 per gallon, down from $2 recorded a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, increased 0.1% year over year to 8.59 cents. Revenue per available seat mile (RASM) stood at 13.68 cents, up 0.1% year over year.

Liquidity

At the end of first-quarter 2016, Southwest Airlines had $3,582 million in cash and short-term investments compared with $3,051 million at the end of 2015. In the reported quarter, the company had long-term debt (including current portion) of $2,355 million compared with $2,541 million at the end of 2015. Southwest Airlines generated operating cash flow of $1,616 million in the reported quarter compared with $1452 million in the same quarter last year. At the end of first-quarter 2016, free cash flow was $1,178 million compared with $879 million in the year-ago quarter.

Guidance

Southwest Airlines anticipates a moderate improvement in RASM in second-quarter 2016 from the second quarter of 2015.

Zacks Rank & Key Picks

Southwest Airlines currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include SkyWest Inc. SKYW, Ryanair Holdings plc RYAAY and GOL Linhas Aereas Inteligentes S.A. GOL. All the three stocks carry a Zacks Rank #2 (Buy).

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