Key Stats for Southwest Airlines Stock
- Price Change for $LUV stock: 1%
- Current Share Price: $34
- 52-Week High: $38
- $LUV Stock Price Target: $34
What Happened?
Southwest Airlines (LUV) stock is up 1% after it reported a surprise profit for the third quarter and guided for record sales in the fourth quarter. The airline earned $0.11 per share on an adjusted basis, crushing expectations for a $0.04 loss, while revenue came in at $6.95 billion versus estimates of $6.93 billion.
GAAP net income hit $58 million, down from $89 million in the year-ago period, but the fact that Southwest posted any profit at all surprised Wall Street, given the tough operating environment.
Revenue rose just 1% from the prior year, but the company delivered record third-quarter operating revenues.
More importantly, Southwest said it expects fourth-quarter unit revenue to rise between 1% and 3% with capacity up 6% over the same period last year, and anticipates generating record quarterly revenues.
CEO Bob Jordan emphasized the progress, saying “we delivered a profitable quarter, with both unit revenues and unit costs performing better-than-anticipated, are reaffirming our full year 2025 EBIT guidance, and expect meaningful margin expansion in the fourth quarter.”
Southwest reaffirmed its full-year earnings before taxes guidance of $600 million to $800 million, down from an earlier forecast of $1.7 billion that was cut in July, along with other airlines.
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What the Market Is Telling Us About LUV Stock
The market’s positive reaction to LUV stock shows investors are relieved the airline is stabilizing after a brutal stretch and encouraged by signs that the business transformation is working.
Southwest is undergoing the most significant changes in its history, abandoning longtime policies like open seating and two free checked bags in an effort to better compete with rivals.
The company experienced a clear positive inflection in demand beginning in early July that sustained momentum throughout the third quarter.
Corporate travel improved sequentially from the second quarter, and loyalty revenue jumped 7% year-over-year while new co-brand credit card acquisitions climbed double digits.
LUV stock got a boost from better-than-expected unit costs, with cost per available seat mile excluding fuel (CASM-X) increasing just 2.5% year-over-year, well below guidance.
Southwest continues to target $370 million in cost reductions this year and has delivered broad-based cost discipline across the organization.
The airline launched the sale of assigned and extra legroom seating for flights beginning January 27, 2026, and CFO Tom Doxey told CNBC that increased sales from selling seat assignments will show up in the first quarter when those flights begin.
Management said the volume and composition of initial bookings are in line with expectations, which is encouraging for LUV stock.
Southwest returned $439 million to shareholders during the third quarter through $189 million in dividends and $250 million in share repurchases under its current $2 billion buyback authorization.
The company ended the quarter with $3 billion in cash and cash equivalents plus short-term investments, and a fully available $1.5 billion revolving credit line.
Leverage sits at 2.1x adjusted debt to adjusted EBITDAR, within the target range of 1.0x to 2.5x. Southwest also has approximately $16.8 billion in unencumbered aircraft and primarily aircraft-related assets, providing significant financial flexibility.
The fourth-quarter guidance assumes demand strength remains at current levels through the end of the quarter. It also reflects the planned acceleration from the company’s initiatives, the recent impact of the government shutdown, and approximately a 2-point year-over-year increase in fourth-quarter capacity since July.
The capacity increase resulted from shifting the extra legroom retrofit of the -700 fleet to January, maximizing revenue potential during the holiday travel period.
LUV stock benefited from operational improvements, with Southwest currently in first place year-to-date based on its calculations of the Wall Street Journal’s airline rankings.
Strong operational performance matters because it reduces costs and improves customer satisfaction, both of which flow to the bottom line.
The carrier received eight Boeing 737-8 aircraft and retired 16 jets in the third quarter, ending with 802 aircraft. Southwest now expects 53 -8 aircraft deliveries in 2025, up from a prior estimate of 47, as Boeing continues ramping production.
LUV stock remains down more than 12% year-to-date, showing the airline still has work to do to regain investor confidence.
But the third-quarter results and fourth-quarter outlook suggest the transformation is gaining traction, and management’s confidence in expecting meaningful margin expansion in the fourth quarter is a clear positive signal.
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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!
