Southwest Airlines Co. (NYSE:LUV) is gearing up to announce its third-quarter 2023 results on October 26. The airline has exhibited some inconsistency in its performance relative to the Zacks Consensus Estimate over the last few quarters, with an average negative deviation of 293.09%. However, it managed to outperform expectations in the remaining two quarters.
Let’s delve into the factors shaping Southwest Airlines’ prospects for this earnings season.
Q3 Expectations
For the third quarter of 2023, the Zacks Consensus Estimate for Southwest Airlines’ revenues is currently set at $6.57 billion, indicating a growth of 5.63% compared to the previous year. This growth is attributed to a solid rebound in domestic and leisure air travel demand, as well as an increase in passenger revenues.
On the downside, escalating fuel prices pose a concern. Economic fuel costs per gallon are expected to range between $2.55 and $2.65 for the third quarter of 2023.
In addition to rising fuel expenses, increased labor and airport costs are likely to have impacted the company’s bottom-line growth, leading to higher operating expenses. Southwest Airlines anticipates that consolidated unit costs, excluding fuel, oil, profit-sharing expenses, and special items, will increase by 3.5-6.5% in the third quarter of 2023 compared to the same period in 2022. This estimate represents a 5.3% increase from the third quarter of 2022. Notably, the Zacks Consensus Estimate for third-quarter earnings has been revised downward by 57.7% over the past 90 days.
Highlights from Q2
In the second quarter of 2023, Southwest Airlines reported earnings of $1.09 per share, surpassing the Zacks Consensus Estimate of $1.08. However, this marked a 16.2% decline compared to the previous year. Revenues for the quarter stood at $7.037 million, outperforming the Zacks Consensus Estimate of $6.988.7 million and reflecting a 4.6% improvement from the previous year, primarily driven by robust leisure demand.
Investors and analysts will be eagerly awaiting Southwest Airlines’ upcoming earnings report to gain insights into its performance and the airline industry’s current dynamics.
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