On Thursday, Goldman Sachs (NYSE:GS) reiterated its Sell rating on Southwest Airlines Co. (NYSE:LUV), while maintaining the price target at $28.00. According to InvestingPro data, analyst targets for the stock range from $19 to $39, with 6 analysts recently revising their earnings estimates upward for the upcoming period.
The airline has updated its revenue forecast for the December quarter, now expecting unit revenue to increase by 5.5% to 7.0% year-over-year, compared with the previously projected 3.5% to 5.5% rise.
This adjustment is attributed to stronger-than-anticipated leisure demand and the swift impact of revenue management strategies implemented by the company. The company has demonstrated solid growth with revenue increasing 7.61% over the last twelve months to $27.38 billion.
Southwest expressed optimism about its forward bookings, particularly for the upcoming holiday season, and anticipates that the robust demand trends will continue into 2025. This outlook aligns with the sentiments shared by industry peers at Goldman Sachs' Industrials and Materials Conference held on Wednesday. Today, a fireside chat featuring Southwest CEO, Bob Jordan, is scheduled for 9:20 AM EST and will be available via webcast.
The airline also disclosed plans for a significant return of capital to shareholders. Following the completion of a $250 million accelerated share repurchase (ASR) program announced in October 2024, Southwest intends to initiate a new $750 million ASR in the first quarter of 2025.
In light of the latest investor update, Goldman Sachs has increased its December quarter earnings per share (EPS) estimate for Southwest to $0.39, up from the previous estimate of $0.33. However, the firm's 12-month price target for the airline's stock remains at $28.00.
In other recent news, Southwest Airlines has revised its Q4 revenue outlook upward, expecting an increase in revenue per available seat mile (RASM) of 5.5% to 7.0%. This positive forecast is supported by six analysts who recently revised their earnings upwards for the upcoming period. The airline also plans to initiate an additional $750 million accelerated share repurchase (ASR) program in Q1 2025.
Meanwhile, UBS and Goldman Sachs have assumed coverage on Southwest with a Sell rating, citing risks to future earnings and execution risks associated with strategic initiatives. However, BofA Securities, Citi, and TD Cowen have maintained or resumed coverage with Neutral or Hold ratings.
In leadership developments, Southwest Airlines has appointed Rakesh Gangwal as the independent Chair of the Board of Directors. The company has also terminated its common stock purchase rights, as disclosed in a recent 8-K filing with the Securities and Exchange Commission.
Additionally, the Transportation Security Administration (TSA) recently experienced its busiest day in history, screening over 3.087 million individuals at airports across the United States, underscoring the importance of early arrival during peak travel periods.
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