Last week, you might have seen that Southwest Airlines Co. (NYSE:LUV) released its first-quarter result to the market. The early response was not positive, with shares down 8.0% to US$27.03 in the past week. The statutory results were not great - while revenues of US$6.3b were in line with expectations,Southwest Airlines lost US$0.39 a share in the process. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Southwest Airlines' 17 analysts are now forecasting revenues of US$28.1b in 2024. This would be a modest 5.1% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 88% to US$1.23. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$28.4b and earnings per share (EPS) of US$1.33 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
The consensus price target held steady at US$27.76, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Southwest Airlines, with the most bullish analyst valuing it at US$38.00 and the most bearish at US$19.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 6.9% growth on an annualised basis. That is in line with its 7.6% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 6.6% annually. It's clear that while Southwest Airlines' revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Southwest Airlines. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$27.76, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Southwest Airlines analysts - going out to 2026, and you can see them free on our platform here.
You still need to take note of risks, for example - Southwest Airlines has 3 warning signs (and 1 which is potentially serious) we think you should know about.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.