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SOUTHWEST AIRLINES CO (LUV) Stock Fundamental Analysis

NYSE:LUV - New York Stock Exchange, Inc. - US8447411088 - Common Stock

33.27  +1.17 (+3.64%)

Premarket: 33.5 +0.23 (+0.69%)

Fundamental Rating

3

We assign a fundamental rating of 3 out of 10 to LUV. LUV was compared to 23 industry peers in the Passenger Airlines industry. While LUV seems to be doing ok healthwise, there are quite some concerns on its profitability. LUV is valied quite expensively at the moment, while it does show a decent growth rate.


Dividend Valuation Growth Profitability Health

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3

1. Profitability

1.1 Basic Checks

LUV had positive earnings in the past year.
In the past year LUV had a positive cash flow from operations.
LUV had positive earnings in 4 of the past 5 years.
Of the past 5 years LUV 4 years had a positive operating cash flow.
LUV Yearly Net Income VS EBIT VS OCF VS FCFLUV Yearly Net Income VS EBIT VS OCF VS FCFYearly Net Income VS EBIT VS OCF VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 2B -2B 4B -4B

1.2 Ratios

LUV has a Return On Assets of -0.14%. This is comparable to the rest of the industry: LUV outperforms 56.52% of its industry peers.
The Return On Equity of LUV (-0.47%) is better than 60.87% of its industry peers.
Industry RankSector Rank
ROA -0.14%
ROE -0.47%
ROIC N/A
ROA(3y)1.83%
ROA(5y)1.1%
ROE(3y)6.28%
ROE(5y)1.52%
ROIC(3y)N/A
ROIC(5y)N/A
LUV Yearly ROA, ROE, ROICLUV Yearly ROA, ROE, ROICYearly ROA, ROE, ROIC 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 20 -20

1.3 Margins

In the last couple of years the Profit Margin of LUV has declined.
In the last couple of years the Operating Margin of LUV has declined.
LUV has a Gross Margin of 70.11%. This is amongst the best in the industry. LUV outperforms 91.30% of its industry peers.
In the last couple of years the Gross Margin of LUV has remained more or less at the same level.
The Profit Margin and Operating Margin are not available for LUV so they could not be analyzed.
Industry RankSector Rank
OM N/A
PM (TTM) N/A
GM 70.11%
OM growth 3YN/A
OM growth 5Y-38.55%
PM growth 3YN/A
PM growth 5Y-30.79%
GM growth 3Y1.72%
GM growth 5Y-0.81%
LUV Yearly Profit, Operating, Gross MarginsLUV Yearly Profit, Operating, Gross MarginsYearly Profit, Operating, Gross Margins 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 20 -20 40 -40 60

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4

2. Health

2.1 Basic Checks

LUV does not have a ROIC to compare to the WACC, probably because it is not profitable.
LUV has more shares outstanding than it did 1 year ago.
LUV has more shares outstanding than it did 5 years ago.
Compared to 1 year ago, LUV has an improved debt to assets ratio.
LUV Yearly Shares OutstandingLUV Yearly Shares OutstandingYearly Shares Outstanding 2015 2016 2017 2018 2019 2020 2021 2022 2023 200M 400M 600M
LUV Yearly Total Debt VS Total AssetsLUV Yearly Total Debt VS Total AssetsYearly Total Debt VS Total Assets 2015 2016 2017 2018 2019 2020 2021 2022 2023 10B 20B 30B

2.2 Solvency

An Altman-Z score of 1.85 indicates that LUV is not a great score, but indicates only limited risk for bankruptcy at the moment.
The Altman-Z score of LUV (1.85) is better than 82.61% of its industry peers.
LUV has a Debt/Equity ratio of 0.49. This is a healthy value indicating a solid balance between debt and equity.
With an excellent Debt to Equity ratio value of 0.49, LUV belongs to the best of the industry, outperforming 86.96% of the companies in the same industry.
Industry RankSector Rank
Debt/Equity 0.49
Debt/FCF N/A
Altman-Z 1.85
ROIC/WACCN/A
WACC7.45%
LUV Yearly LT Debt VS Equity VS FCFLUV Yearly LT Debt VS Equity VS FCFYearly LT Debt VS Equity VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 2B 4B 6B 8B 10B

2.3 Liquidity

LUV has a Current Ratio of 0.88. This is a bad value and indicates that LUV is not financially healthy enough and could expect problems in meeting its short term obligations.
Looking at the Current ratio, with a value of 0.88, LUV belongs to the top of the industry, outperforming 82.61% of the companies in the same industry.
LUV has a Quick Ratio of 0.88. This is a bad value and indicates that LUV is not financially healthy enough and could expect problems in meeting its short term obligations.
LUV's Quick ratio of 0.83 is amongst the best of the industry. LUV outperforms 82.61% of its industry peers.
Industry RankSector Rank
Current Ratio 0.88
Quick Ratio 0.83
LUV Yearly Current Assets VS Current LiabilitesLUV Yearly Current Assets VS Current LiabilitesYearly Current Assets VS Current Liabilites 2015 2016 2017 2018 2019 2020 2021 2022 2023 5B 10B 15B

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4

3. Growth

3.1 Past

LUV shows a slight negative growth in Earnings Per Share. In the last year, the EPS has decreased by -9.76%.
LUV shows a very negative growth in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -18.10% yearly.
The Revenue has been growing slightly by 7.61% in the past year.
LUV shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 3.50% yearly.
EPS 1Y (TTM)-9.76%
EPS 3YN/A
EPS 5Y-18.1%
EPS Q2Q%-60.53%
Revenue 1Y (TTM)7.61%
Revenue growth 3Y42.34%
Revenue growth 5Y3.5%
Sales Q2Q%5.29%

3.2 Future

LUV is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 24.23% yearly.
LUV is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 3.64% yearly.
EPS Next Y-50.52%
EPS Next 2Y2.33%
EPS Next 3Y15.08%
EPS Next 5Y24.23%
Revenue Next Year5.67%
Revenue Next 2Y5.44%
Revenue Next 3Y5.35%
Revenue Next 5Y3.64%

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
The Revenue growth rate is stable: in the next years the growth will be about the same than in the last years.
LUV Yearly Revenue VS EstimatesLUV Yearly Revenue VS EstimatesYearly Revenue VS Estimates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 10B 20B 30B
LUV Yearly EPS VS EstimatesLUV Yearly EPS VS EstimatesYearly EPS VS Estimates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 0 2 -2 4 -4 -6

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1

4. Valuation

4.1 Price/Earnings Ratio

A Price/Earnings ratio of 44.96 indicates a quite expensive valuation of LUV.
The rest of the industry has a similar Price/Earnings ratio as LUV.
Compared to an average S&P500 Price/Earnings ratio of 28.29, LUV is valued quite expensively.
LUV is valuated rather expensively with a Price/Forward Earnings ratio of 20.24.
Compared to the rest of the industry, the Price/Forward Earnings ratio of LUV is on the same level as its industry peers.
The average S&P500 Price/Forward Earnings ratio is at 24.44. LUV is around the same levels.
Industry RankSector Rank
PE 44.96
Fwd PE 20.24
LUV Price Earnings VS Forward Price EarningsLUV Price Earnings VS Forward Price Earnings ChartPrice Earnings - Forward Price Earnings PE FPE 10 20 30 40

4.2 Price Multiples

LUV's Enterprise Value to EBITDA ratio is in line with the industry average.
Industry RankSector Rank
P/FCF N/A
EV/EBITDA 12.54
LUV Per share dataLUV EPS, Sales, OCF, FCF, BookValue per sharePer Share Data Per Share 0 10 20 30 40

4.3 Compensation for Growth

LUV's earnings are expected to grow with 15.08% in the coming years. This may justify a more expensive valuation.
PEG (NY)N/A
PEG (5Y)N/A
EPS Next 2Y2.33%
EPS Next 3Y15.08%

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5

5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 2.24%, LUV has a reasonable but not impressive dividend return.
Compared to an average industry Dividend Yield of 2.58, LUV pays a better dividend. On top of this LUV pays more dividend than 91.30% of the companies listed in the same industry.
LUV's Dividend Yield is comparable with the S&P500 average which is at 2.28.
Industry RankSector Rank
Dividend Yield 2.24%

5.2 History

The dividend of LUV has a limited annual growth rate of 4.34%.
LUV has been paying a dividend for at least 10 years, so it has a reliable track record.
Dividend Growth(5Y)4.34%
Div Incr Years0
Div Non Decr Years0
LUV Yearly Dividends per shareLUV Yearly Dividends per shareYearly Dividends per share 2015 2016 2017 2018 2019 2020 2023 2024 0.2 0.4 0.6 0.8

5.3 Sustainability

The earnings of LUV are negative and hence is the payout ratio. LUV will probably not be able to sustain this dividend level.
LUV's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP-879.59%
EPS Next 2Y2.33%
EPS Next 3Y15.08%
LUV Yearly Income VS Free CF VS DividendLUV Yearly Income VS Free CF VS DividendYearly Income VS Free CF VS Dividend 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 2B -2B

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SOUTHWEST AIRLINES CO

NYSE:LUV (1/21/2025, 8:12:46 PM)

Premarket: 33.5 +0.23 (+0.69%)

33.27

+1.17 (+3.64%)

Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)10-24 2024-10-24/bmo
Earnings (Next)01-30 2025-01-30/amc
Inst Owners99.68%
Inst Owner Change0.07%
Ins Owners0.74%
Ins Owner Change73.95%
Market Cap19.95B
Analysts55.33
Price Target32.02 (-3.76%)
Short Float %5.96%
Short Ratio5.51
Dividend
Industry RankSector Rank
Dividend Yield 2.24%
Yearly Dividend0.72
Dividend Growth(5Y)4.34%
DP-879.59%
Div Incr Years0
Div Non Decr Years0
Ex-DateN/A
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)2008.05%
Min EPS beat(2)13.47%
Max EPS beat(2)4002.62%
EPS beat(4)3
Avg EPS beat(4)1056.87%
Min EPS beat(4)-5.93%
Max EPS beat(4)4002.62%
EPS beat(8)3
Avg EPS beat(8)498.25%
EPS beat(12)6
Avg EPS beat(12)342.61%
EPS beat(16)9
Avg EPS beat(16)256.95%
Revenue beat(2)1
Avg Revenue beat(2)0.22%
Min Revenue beat(2)-0.55%
Max Revenue beat(2)1%
Revenue beat(4)2
Avg Revenue beat(4)-0.45%
Min Revenue beat(4)-2.41%
Max Revenue beat(4)1%
Revenue beat(8)2
Avg Revenue beat(8)-0.72%
Revenue beat(12)2
Avg Revenue beat(12)-0.66%
Revenue beat(16)4
Avg Revenue beat(16)-0.82%
PT rev (1m)6.93%
PT rev (3m)20.06%
EPS NQ rev (1m)0%
EPS NQ rev (3m)-19.7%
EPS NY rev (1m)0%
EPS NY rev (3m)264.26%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)-3.36%
Revenue NY rev (1m)0.07%
Revenue NY rev (3m)1.84%
Valuation
Industry RankSector Rank
PE 44.96
Fwd PE 20.24
P/S 0.73
P/FCF N/A
P/OCF 48.55
P/B 1.92
P/tB 2.18
EV/EBITDA 12.54
EPS(TTM)0.74
EY2.22%
EPS(NY)1.64
Fwd EY4.94%
FCF(TTM)-3.21
FCFYN/A
OCF(TTM)0.69
OCFY2.06%
SpS45.65
BVpS17.36
TBVpS15.24
PEG (NY)N/A
PEG (5Y)N/A
Profitability
Industry RankSector Rank
ROA -0.14%
ROE -0.47%
ROCE N/A
ROIC N/A
ROICexc N/A
ROICexgc N/A
OM N/A
PM (TTM) N/A
GM 70.11%
FCFM N/A
ROA(3y)1.83%
ROA(5y)1.1%
ROE(3y)6.28%
ROE(5y)1.52%
ROIC(3y)N/A
ROIC(5y)N/A
ROICexc(3y)N/A
ROICexc(5y)N/A
ROICexgc(3y)N/A
ROICexgc(5y)N/A
ROCE(3y)N/A
ROCE(5y)N/A
ROICexcg growth 3YN/A
ROICexcg growth 5YN/A
ROICexc growth 3YN/A
ROICexc growth 5YN/A
OM growth 3YN/A
OM growth 5Y-38.55%
PM growth 3YN/A
PM growth 5Y-30.79%
GM growth 3Y1.72%
GM growth 5Y-0.81%
F-Score5
Asset Turnover0.79
Health
Industry RankSector Rank
Debt/Equity 0.49
Debt/FCF N/A
Debt/EBITDA 3.6
Cap/Depr 140.42%
Cap/Sales 8.54%
Interest Coverage N/A
Cash Conversion 29.13%
Profit Quality N/A
Current Ratio 0.88
Quick Ratio 0.83
Altman-Z 1.85
F-Score5
WACC7.45%
ROIC/WACCN/A
Cap/Depr(3y)188.57%
Cap/Depr(5y)138.2%
Cap/Sales(3y)11.14%
Cap/Sales(5y)8.74%
Profit Quality(3y)N/A
Profit Quality(5y)N/A
High Growth Momentum
Growth
EPS 1Y (TTM)-9.76%
EPS 3YN/A
EPS 5Y-18.1%
EPS Q2Q%-60.53%
EPS Next Y-50.52%
EPS Next 2Y2.33%
EPS Next 3Y15.08%
EPS Next 5Y24.23%
Revenue 1Y (TTM)7.61%
Revenue growth 3Y42.34%
Revenue growth 5Y3.5%
Sales Q2Q%5.29%
Revenue Next Year5.67%
Revenue Next 2Y5.44%
Revenue Next 3Y5.35%
Revenue Next 5Y3.64%
EBIT growth 1Y-207.63%
EBIT growth 3YN/A
EBIT growth 5Y-36.4%
EBIT Next Year163.71%
EBIT Next 3Y64.83%
EBIT Next 5Y49.09%
FCF growth 1Y-378.07%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y-88.11%
OCF growth 3YN/A
OCF growth 5Y-8.35%