Southwest Airlines Co. (LUV) reported fourth-quarter 2024 earnings of 56 cents per share, which outpaced the Zacks Consensus Estimate of 45 cents and improved 51.5% from the year-ago reported quarter.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Revenues of $6.93 billion missed the Zacks Consensus Estimate of $6.95 billion. The top line, however, improved 1.6% year over year on the back of the successful execution of tactical actions, which included the maturation of the revenue management system and techniques, marketing and distribution evolution, and network optimization, as well as continued demand strength. Close-in bookings performed better than expectations in December, mainly during the holiday period.
Southwest Airlines Co. Price, Consensus and EPS Surprise
Airline traffic, measured in revenue passenger miles, fell 3.1% year over year to 34.47 billion in the quarter under review. Capacity or available seat miles (ASMs) fell 4.4% year over year to 43.53 billion.As traffic decline is less than capacity,load factor (percentage of seat occupancy) grew 1 percentage point to 79.2%. Our estimate stands at 81.9%.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) grew 6.2% year over year to 14.49 cents.
Revenue per available seat mile (RASM) grew 6.2% year over year to 15.92 cents.
Operating Expenses & Income
In the fourth quarter, Southwest Airlines incurred an operating income (as reported) of $278 million against an operating loss of $404 million in the year-ago reported quarter. On an adjusted basis (excluding special items), the company reported operating income of $397 million compared with $182 million in the year-ago reported quarter.
Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 6.3% year over year.
Fuel cost per gallon (inclusive of fuel tax: economic) declined 19.3% year over year to $2.42.
Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items grew 11.1% year over year.
Liquidity
Southwest Airlines ended the fourth quarter with cash and cash equivalents of $7.50 billion compared with $8.50 billion at the end of the prior quarter. The company had long-term debt (less current maturities) of $5.06 billion in the fourth quarter compared with $5.07 billion at the end of the prior quarter.
LUV generated $476 million of cash from operating activities in the reported quarter, while CapEx was $461 million.
LUV returned $680 million to shareholders in the form of dividends and share repurchases in 2024. Further, LUV announced a $750 million accelerated share repurchase program under its $2.5 billion share repurchase authorization
Outlook
For first-quarter 2025, ASMs are estimated to decline 2%-3% from the year-ago reported figure. Economic fuel costs per gallonare expected to be between $2.50 and $2.60. RASM is anticipated to be up 5-7% from the year-ago reported figure. LUV expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase 7-9% in the first quarter of 2025 from the comparable period in 2024. Interest expenses are expected to be $45 million in the first quarter.
For second-quarter 2025, LUV expects capacity to increase in the range of 1-2% on a year-over-year basis.
For 2025, operating margin, excluding special items, is expected to be up 3-5%. Return on invested capital (ROIC) is expected to be up 5-8%. ASMs are estimated to improve 1-2% year over year. LUV estimates 2025 effective tax rate in the range of 22%–24%.
For 2027,LUV aims to achieve operating margin, excluding special items, ofmore than 10%. ROIC is expected to increase more than 15%. ASMs are estimated to improve 1-2% year over year.
LUV’s Zacks Rank
Currently, Southwest Airlines carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Q4 Performances of Other Transportation Companies
Delta Air Lines DAL reported fourth-quarter 2024 earnings (excluding 56 cents from non-recurring items) of $1.85 per share, which surpassed the Zacks Consensus Estimate of $1.76. Earnings increased 44.5% on a year-over-year basis due to low fuel costs.
DAL’srevenues of $15.56 billion surpassed the Zacks Consensus Estimate of $14.99 billion and increased 9.4% on a year-over-year basis, driven by strong holiday travel demand. Adjusted operating revenues (excluding third-party refinery sales) totaled $14.44 billion, up 5.7% year over year. Passenger revenues, which accounted for 82.4% of total revenues, increased 5% year over year at $12.82 billion.
J.B. Hunt Transport Services (JBHT) reported fourth-quarter 2024 earnings per share of $1.53, which fell short of the Zacks Consensus Estimate of $1.62. However, the bottom line increased 4.1% on a year-over-year basis.
JBHT’s total operating revenues of $3.15 billion narrowly beat the Zacks Consensus Estimate of $3.13 billion but declined 4.8% year over year. The decline was mainly due to lower fuel surcharge revenues and yield pressure in its Intermodal segment.
JBHT’s fourth-quarter 2024 operating revenues of $2.78 billion, excluding fuel surcharge revenue, decreased 2% from the year-ago reported quarter. Total operating income for the reported quarter increased 2% year over year to $207 million.
Alaska Air Group, Inc. (ALK) reported solid fourth-quarter 2024results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Quarterly earnings per share of 97 cents outpaced the Zacks Consensus Estimate of 47 cents and improved more than 100% on a year-over-year basis. The reported figure exceeded the guided range of 40-50 cents.
ALK’s bottom line benefitted from solid revenue growth, cost and operational performance throughout the quarter and holiday travel periods. ALK also benefitted from a renegotiation of certain interest payments and favorability in its fourth-quarter tax rate.
ALK’s operating revenues of $3.53 billion beat the Zacks Consensus Estimate of $3.51 billion. The top line jumped 38.4% year over year, with passenger revenues accounting for 89.9% of the top line and increasing 37% owing to continued recovery in air-travel demand.
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