Key Stats for LUV Stock
- Pre-Market Price change for LUV stock: 6%
- $LUV Share Price as of Jan. 28: $41
- 52-Week High: 45
- $LUV Stock Price Target: $42
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What Happened?
Southwest Airlines (LUV) stock jumped more than 5% in pre-market after it issued surprisingly strong profit guidance for 2026.
- The carrier expects to earn at least $4 per share this year, crushing Wall Street’s estimate of $3.19 and signaling that its dramatic business model overhaul is starting to pay off.
- The airline also forecast first-quarter revenue per seat mile to rise 9.5%, well above the 8.5% analysts expected.
- Adjusted earnings for the quarter are projected at $0.45 per share versus Wall Street’s estimate of just $0.33 per share.
- For the full year, Southwest expects capacity to grow 2% to 3%—nearly double last year’s expansion rate.
“We wanted to give a little more time before we gave the upper bound of this forecast just to let a little more information come in about the new initiatives,” CFO Tom Doxey said in an interview with CNBC.
The bullish guidance comes as Southwest wraps up the most ambitious transformation in its 53-year history.
Over the past two years, the airline has abandoned its signature policies—including open seating and free checked bags—in favor of revenue-generating practices that mirror its competitors.
Starting this week, Southwest moved to assigned seating with upcharges for premium spots, including its new extra legroom section.
Last year, the airline began charging customers to check bags for the first time ever and launched basic economy fares.
The company also optimized its Rapid Rewards loyalty program, expanded online distribution through partnerships with Expedia and Priceline, and launched free Wi-Fi for loyalty members.
For the fourth quarter, Southwest reported adjusted earnings of $0.58 per share, matching analyst expectations, while revenue came in slightly below estimates at $7.44 billion versus the expected $7.51 billion.
Net income rose nearly 24% year-over-year to $323 million.
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What the Market Is Telling Us About LUV Stock
The surge in LUV stock reflects growing investor confidence that Southwest’s transformation is working. After years of activist pressure from Elliott Investment Management, the airline has overhauled nearly every aspect of its business model—and the financial results are starting to show.
CEO Bob Jordan emphasized that the company isn’t finished making changes. “We’re not done,” Doxey said Wednesday.
Jordan has previously discussed the possibility of launching airport lounges, another revenue stream that could help Southwest compete with legacy carriers.
The airline’s strong start to 2026 comes despite operational challenges from Winter Storm Fern, which forced carriers to cancel thousands of flights in January.
Southwest’s Texas rival, American Airlines, has particularly struggled to recover from the weather-related impacts, potentially giving Southwest a competitive advantage.
LUV stock has benefited from the airline’s sharp focus on cost control.
- Southwest exceeded its 2025 cost-reduction target of $370 million, including the company’s first-ever layoff of non-contract and management employees.
- The carrier also discontinued its fuel hedging program and deployed new technology to boost operational reliability.
- These efforts helped Southwest earn the #1 ranking in The Wall Street Journal’s Best U.S. Airlines of 2025, a significant achievement that validates the company’s focus on balancing transformation with customer service.
The airline returned $2.9 billion to shareholders in 2025 through dividends and share repurchases, buying back approximately 14% of outstanding shares while maintaining its investment-grade credit rating.
This aggressive capital return program has helped support the stock price during the transition period.
Investors will be watching Southwest’s earnings call this morning for more details on the financial impact of Winter Storm Fern, the ramp-up of new revenue streams like bag fees and premium seating, and long-term profit growth beyond the initial sales spike from these initiatives.
With assigned seating just launched and capacity growth accelerating, LUV stock appears positioned for continued momentum if the airline can execute on its transformation while maintaining operational excellence.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
