What to expect when Southwest Airlines (LUV) reports Q3 2023 earnings

Shares of Southwest Airlines Co. (NYSE: LUV) gained over 1% in mid-day trade on Monday. The stock has dropped 27% year-to-date. The airline is slated to report its third quarter 2023 earnings results on Thursday, October 26, before market open. Here’s a look at what to expect from the earnings report:

Revenues

Analysts are projecting revenues of $6.56 billion for Southwest in Q3 2023, which represents a growth of over 5% from the same period a year ago. In the second quarter of 2023, operating revenues increased nearly 5% year-over-year to $7 billion.

Earnings

The consensus estimate for EPS in Q3 2023 is $0.38 which compares to EPS of $0.50 reported in the prior-year quarter. In Q2 2023, the company reported adjusted EPS of $1.09.

Points to note

Southwest expects strong operating revenues for the third quarter of 2023 on the back of solid performance during the Labor Day holiday period and overall healthy demand for leisure travel. The company also expects corporate travel to have improved in Q3.

However, the airline did face challenges in the third quarter. Close-in leisure bookings in August were impacted by seasonal trends and the company had to deal with cancellations in the quarter due to severe weather conditions. The industry, in general, has also been dealing with rising fuel costs.

Southwest has lowered its guidance for unit revenues and now expects it to be down 5-7% YoY in Q3 versus the previous expectation of down 3-7%. It expects capacity to be up 12% YoY. The company raised its outlook for fuel costs to $2.70-2.80 per gallon from the prior range of $2.55-2.65. Operating expenses per available seat mile, excluding fuel, (CASM-X) is estimated to be up 3.5-6.5% YoY.