Post Earnings Coverage as Southwest Airlines Reported Record Revenue and Cash Flow
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Upcoming AWS Coverage on Copa Holdings Post-Earnings Results
LONDON, UK / ACCESSWIRE / May 8, 2017 / Active Wall St. announces its post-earnings coverage on Southwest Airlines Co. (NYSE: LUV). The Company disclosed its first quarter fiscal 2017 results on April 27, 2017. The No.4 US airline by passenger traffic missed sales and earnings expectations. Register with us now for your free membership at:
One of Southwest Airlines' competitors within the Regional Airlines space, Copa Holdings, S.A. (NYSE: CPA), announced on April 12, 2017, that it will post it earnings release for Q1 2017 on May 10, 2017, at 11:00 AM ET. AWS will be initiating a research report on Copa Holdings in the coming days.
Today, AWS is promoting its earnings coverage on LUV; touching on CPA. Get our free coverage by signing up to:
Southwest Airlines' operating revenue for the quarter ended March 31, 2017, increased 1.2% to a first quarter record of $4.88 billion, driven largely by first quarter record passenger revenues of $4.4 billion. On a unit basis, the Company's operating revenues declined 2.8% on a y-o-y basis. Southwest Airlines reported a 2.6% decline in passenger revenue yield. Southwest Airlines' revenue numbers came in below analysts' consensus of $4.89 billion
For Q1 2017, Southwest Airlines' operating income was $658 million compared with $944 million in Q1 2016. Excluding special items, the Company's operating income for the reported quarter was $626 million compared with $952 million in the prior year's same quarter.
Southwest Airlines' other expenses in Q1 2017 were $105 million compared with $128 million in Q1 2016. Net interest expense in the reported quarter was $11 million compared with $14 million in the year earlier comparable quarter.
For Q1 2017, Southwest Airlines' net income was $351 million, or $0.57 per diluted share, compared with net income of $513 million, or $.79 per diluted share, for Q1 2016. Excluding special items, the Company's net income was $372 million, or $.61 per diluted share, compared with Q1 2016 net income of $569 million, or $.88 per diluted share, for the year ago corresponding period. Southwest Airlines' earnings missed Wall Street's estimates for earnings of $0.62 per share.
Cost Performance
For Q1 2017, Southwest Airlines' total operating expenses increased 8.8% to $4.2 billion, and 4.5% compared to the year ago same period. For the reported quarter, the Airlines' economic fuel costs were $1.96 per gallon compared with $1.78 per gallon in the year earlier quarter including $0.56 per gallon in unfavorable cash settlements from fuel derivative contracts.
During Q1 2017, Southwest Airlines' profit-sharing expense was $99 million compared with $155 million in Q1 2016. Excluding fuel and oil expense, special items, and profit-sharing expense, operating expenses for the reported quarter increased 11.3% and 6.9% on a unit basis, year-over-year. Approximately four points of this unit cost increase was due to the significant snap up in wage rates in year one of new Flight Attendant and Pilot contracts that became effective in Q4 2016.
Liquidity and Capital Deployment
As of March 31, 2017, Southwest Airlines' had approximately $3.5 billion in cash and short-term investments, and a fully available unsecured revolving credit line of $1 billion. Net cash provided by operations during Q1 2017 was a first quarter record $1.6 billion, capital expenditures were $414 million, and free cash flow was a first quarter record $1.2 billion. The Company repaid $369 million in debt and capital lease obligations during the reported quarter 2017, and expects to repay approximately $190 million in debt and capital lease obligations during the remainder of 2017.
During Q1 2017, Southwest Airlines' returned $673 million to its Shareholders through the payment of $123 million in dividends and the repurchase of 9.8 million shares in common stock for $550 million. The Company received 8.8 million shares pursuant to a $500 million accelerated share repurchase (ASR) program launched and completed during the reported quarter, and the remaining shares were repurchased through $50 million in open market transactions. Southwest Airlines has $400 million remaining under its May 2016 $2.0 billion share repurchase authorization.
Fleet and Capacity
Southwest Airlines ended Q1 2017 with 727 aircraft in its fleet. This reflects the first quarter 2017 delivery of nine new Boeing 737-800s and three pre-owned Boeing 737-700s, as well as the retirement of eight Classic aircraft. The Company intends to retire the 79 Classic aircraft that remained in its fleet at March 31, 2017, by the end of Q3 2017. The Company's total aircraft, net of all Classic retirements, is expected to decline to 703 by year-end, and available seat mile (ASM) growth, is expected to be approximately 3.5%.
Guidance
Based on current bookings and improved yield trends, Southwest Airlines' expects positive year-over-year RASM in Q2 2017. Based on the Company's existing fuel derivative contracts and market prices as of April 21, 2017, Q2 2017 economic fuel costs are estimated to be in the $1.95 to $2.00 per gallon range. For the upcoming quarter, premium costs related to fuel derivative contracts are estimated to be approximately $35 million compared with $48 million in Q2 2016.
Stock Performance
On Friday, May 05, 2017, the stock closed the trading session at $58.40, marginally rising 0.10% from its previous closing price of $58.34. A total volume of 2.40 million shares have exchanged hands. Southwest Airlines' stock price gained 10.63% in the last three months, 48.01% in the past six months, and 41.89% in the previous twelve months. Moreover, the stock surged 17.38% since the start of the year. The Company's shares are trading at a PE ratio of 17.57 and have a dividend yield of 0.68%. At Friday's closing price, the stock's net capitalization stands at $35.20 billion.
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