Categories Analysis, Industrials

What to look for when Southwest Airlines (LUV) reports Q4 2023 earnings

Southwest expects capacity for the fourth quarter to be up around 21% YoY

Shares of Southwest Airlines Co. (NYSE: LUV) rose over 1% on Thursday. The stock has gained 17% in the past three months. The airline is scheduled to report its earnings results for the fourth quarter of 2023 on Thursday, January 25, before markets open. Here’s a look at what to expect from the earnings report:

Revenue

Analysts are projecting revenue of $6.74 billion for the fourth quarter of 2023, which would represent a 9% growth from the same period a year ago. In the third quarter of 2023, operating revenues increased 5% year-over-year to $6.5 billion.

Earnings

The consensus estimate for EPS in Q4 2023 is $0.12. This compares to an adjusted loss of $0.38 per share reported in Q4 2022. In Q3 2023, the company reported adjusted EPS of $0.38.

Points to note

In its investor update provided in December, Southwest said travel demand and yields remained healthy in the fourth quarter of 2023, with strong leisure demand and record revenue during the Thanksgiving holiday. Close-in bookings, including managed business bookings, were better than expected in November through mid-December. Therefore the company expects its unit revenues for the fourth quarter to be down 9-10% year-over-year, instead of its previous expectation of down 9-11%.

Southwest expects capacity for the fourth quarter to be up around 21% YoY. Economic fuel costs are expected to range between $3.00-3.10 versus the prior range of $2.90-3.00. Operating costs, excluding fuel, (CASM-X) is projected to be down 16-19% YoY.

Looking ahead to 2024, Southwest said it expects year-over-year capacity growth of 10-12% for the first quarter and 6-8% for the full year. The airline also stated that “the annual goal for capacity beyond 2024 is now for low-to-mid single-digit YoY ASM growth with low single-digit YoY trip growth.”

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