Southwest Airlines (LUV) stock is trading notably higher Thursday after the air carrier raised a key third-quarter revenue forecast and said its board of directors authorized a large share buyback program. LUV is also hosting an investor day today, where it is unveiling its transformation plans.
In a filing with the Securities and Exchange Commission (SEC), Southwest said it now expects revenue per available seat mile (RASM) to increase 2% to 3% in the third quarter, up from its previous estimate of flat to a decline of up to 2%.
The company noted that the improved outlook was driven by rebookings from customers impacted by the outage caused by an incident at CrowdStrike in July, as well as "improving industry demand trends."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Additionally, Southwest announced that its board of directors authorized a new $2.5 billion share repurchase program, which represents more than 13% of its current market cap. Stock buybacks can help boost the share price.
Southwest to unveil transformation plans
Southwest is also hosting an investor day today where it is outlining its three-year plan to transform its customer experience. By improving the customer experience, the company says it will also "drive revenue growth and return the carrier to industry-leading profitability."
Among its plans to transform the customer experience, Southwest Airlines announced plans for assigned seating, premium seating, boarding with upgrades and that bags will continue to fly free.
"We've spent the past few years laying a foundation that serves as the base of our transformation," said Ryan Green, Southwest's executive vice president of commercial transformation, in a statement. "We've already started rolling out modernized cabins with improved WiFi, in-seat power, larger overhead bins, enhanced operational efficiencies, and optimized flight schedules."
The company also announced several new offerings for its customers, including global airline partnerships to expand its network, enhancements to its rewards program and a new vacation package service that will launch in 2025.
"The strategic vision announced today is designed to return us to financial prosperity and drive value creation," said Tammy Romo, chief financial officer at Southwest, in a statement.
Is LUV stock a buy, sell or hold?
It's been a turbulent stretch on the price charts for Southwest Airlines, which was flat for the year to date through the September 25 close. Unsurprisingly, analysts are on the sidelines when it comes to the industrial stock.
According to S&P Global Market Intelligence, the consensus analyst target price for LUV stock is $25.30, representing a discount of more than 19% to current levels. Additionally, the consensus recommendation is Hold.
Financial services firm Jefferies is even more skeptical of LUV stock, as evidenced by its Underperform rating (equivalent to a Sell) and $20 price target.
"Southwest is making major strategy pivots for the first time in 50 years with the introduction of assigned seating, redeye flights, and extra legroom seats, all in an effort to attract and grow its customer base," said Jefferies analyst Sheila Kahyaoglu in a September 20 note.
"Near-term challenges from the network positioning, industry oversupply, and slower-than-expected learnings on the revenue management system work against LUV in tandem with the risks posed by premium seat adoption and the incremental capital expenditures that go with it," she added.
Related Content
-
Markets Are Quiet Ahead of Fed Day: Stock Market TodayInvestors, traders and speculators appear to be on hold amid an unusually fraught Fed meeting.
-
Quiz: Test Your Knowledge of the OBBB, Wealth Transfer and Early RetirementQuiz The financial professionals who contribute to Kiplinger's Adviser Intel recently wrote about the OBBB's impact on retirement, how to ensure your wealth passes to your family and early retirement questions.
-
Markets Are Quiet Ahead of Fed Day: Stock Market Today
Investors, traders and speculators appear to be on hold amid an unusually fraught Fed meeting.
-
5 Multibagger Stocks With Amazing Returns in 2025multibagger stocks As the term suggests, multibagger stocks multiply your money – gains of 1,200%, for example. Here's where to look for that kind of performance this year.
-
Investing Freebies: Perks You Get for Owning These StocksWhile the biggest investing returns come over the long term, these companies offer instant gratification for investors with several freebies and perks.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client ReviewsFinancial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop InvestmentsTruck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
How Digital Platforms Are Changing the Way You Invest in GoldInvesting in gold is easier than ever thanks to digital platforms. Learn how online tools are lowering costs, increasing transparency and making gold accessible to all investors.
-
Stocks Rise to Start Fed Week: Stock Market TodayThe Nasdaq Composite and S&P 500 hit new record closing highs as Wall Street awaits the Fed's next rate cut.
