Southwest Airlines Stock Valuation

southwest airlines stock

Hello, today I will be doing a valuation analysis on Southwest Airlines Stock. This is actually for a pitch competition and I chose Southwest Airlines stock as I’m strongly familiar with them.

Analysis on Southwest Airlines Co

Ticker LUV
Sector Regional Airlines
Latest price $35.54
Value $22,043M
Daily vol $429M
Date 03 August 2016

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Southwest Airlines is a passenger airline that provides scheduled air transportation in the United States and near-international markets. The Company serves approximately 100 destinations in over 40 states, such as the District of Columbia, the Commonwealth of Puerto Rico, and approximately seven near-international countries, including Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, and Belize. The Company added its first three destinations in Central America (San Jose, Costa Rica, Belize City, Belize, and Liberia, Costa Rica) and also commenced Southwest service to a fourth destination in Mexico (Puerto Vallarta). Southwest operates a total of approximately 704 Boeing 737 aircraft. The Company also added approximately 20 domestic nonstop destinations from Dallas Love Field. Southwest offers a total of 180 weekday departures to 50 nonstop destinations from Dallas Love Field.

Recent financials

Revenues have increased at an average rate of 6.01% year-on-year. Earnings per share of Southwest airlines stock has increased drastically at an average rate of 99.64% year-on-year.

Metric 2015A 2014A 2013A 2012A 2011A
Revenue (in millions) $19,820 $18,605 $17,699 $17,088 $15,658
EPS $3.27 $1.64 $1.05 $0.56 $0.23


Southwest appears in line with its competitors with a slight marginal advantage in terms of operating profit. Its return on equity is on the lower end compared to the others.

Companies Latest Sales Operating Profit Return on Equity
Southwest Airlines Co $20,505M 27% 33%
JetBlue Airways Corporation $6,540M 23% 24%
Alaska Air Group, Inc. $5,733M 31% 38%
Delta Air Lines, Inc. $40,307M 25% 45%
American Airlines Group Inc $40,134M 23% 167%
Spirit Airlines Incorporated $2,217M 28% 26%
United Continental Holdings Inc $36,933M 20% 57%

Cash / Debt?

Southwest Airlines Co has $84M of net debt. That is 0x it’s latest operating profit.

Wall Street thinks?

The professionals on Wall Street have a $49.27 for Southwest Airlines stock and their recommendation to clients is Buy. That implies an upside of 39% to their target.


The following table shows the key valuation metrics for Southwest Airlines stock compared to its peers.

Valuation Forecast PE Long-term Growth Dividend Yield FCF Yield
Southwest Airlines Co $22,893M 10x 14% 1% 16%
JetBlue Airways Corporation $5,563M 8x 3% 0% 19%
Alaska Air Group, Inc. $8,210M 9x 2% 2% 16%
Delta Air Lines, Inc. $28,496M 7x 12% 2% 24%
American Airlines Group Inc $18,372M 6x -16% 1% 39%
Spirit Airlines Incorporated $2,678M 10x 4% 0% 14%
United Continental Holdings Inc $16,195M 6x -18% 0% 30%


Southwest Airlines stock is forecast to pay a dividend of $0.35 per share, compared with a historic dividend of $0.33 per share. That is a 6% growth. The forecast dividend of $0.35 compares to a forecast EPS of $3.84. Southwest Airlines Stock isn’t a bad candidate to add to dividend portfolios.


In the last 3 months, Southwest Airlines stock price has moved by -15% that compares with a change in the earnings forecasts of -10%.

BRIEF: For the six months ended 30 June 2016, Southwest Airlines Co revenues increased 7% to $10.21B. Net income increased 25% to $1.33B. Revenues reflect Enplaned Passengers, Total increase of 6% to 74.1M, Revenue Passenger Carried increase of 6% to 60.9M, Load Factor, Total -% increase of 1% to 83.1%, Other increase from $405M to $820M, Passenger increase of 3% to $9.3B.

Disclosure: I am currently LONG LUV

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