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Will Southwest Airlines (LUV) Surprise Earnings in Q1? - Analyst Blog

Zacks Equity Research
Updated

Southwest Airlines Co. LUV is set to release its first-quarter 2015 results before the opening bell on Apr 23.

In the last quarter, the company delivered 9.26% earnings surprise. Meanwhile, in all four quarters last year, the company delivered positive earnings surprises, with an average beat of 10.07%. Let’s see how things are shaping up for this announcement.

Factors at Play

Southwest Airlines continues to benefit from low fuel prices. Moreover, fleet restructuring, introduction of international services and capacity management are likely to act as tailwinds while moving ahead. In addition, successful integration of AirTran will boost Southwest Airlines’ operational and financial performance going forward.

However, stiff competition from low-cost carriers as well as from major airlines that have cut fares in order to attract customers may further 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. Please note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. That is not the case here, as you will see below:

Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at 64 cents. Hence, the ESP is 0.00%.

Zacks Rank: Southwest Airlines carries a Zacks Rank #2 (Buy). While this increases the predictive power, we also need to have a positive ESP to be confident of an earnings surprise.

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 to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

Ryder System, Inc. R has an earnings ESP of +1.98% and a Zacks Rank #2.

Virgin America Inc. VA has an earnings ESP of +7.14% and a Zacks Rank #3.

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United Continental Holdings, Inc. UAL has an earnings ESP of +3.55% and a Zacks Rank #3.


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SOUTHWEST AIR (LUV): Free Stock Analysis Report
 
RYDER SYS (R): Free Stock Analysis Report
 
UNITED CONT HLD (UAL): Free Stock Analysis Report
 
VIRGIN AMERICA (VA): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research