Southwest Airlines Foresees Revenue Growth; Orders 34 More Boeing 737 MAX Aircraft


Shares of Southwest Airlines (LUV) increased 1.1% to close at $58.90 on June 8 after the company updated guidance of its financial and operational trends, as well as its aircraft order book.

Southwest is one of the major airlines of the United States and the world’s largest low-cost carrier airline. (See LUV stock analysis on TipRanks)

The company expects its June revenues to grow on the back of leisure passenger traffic and fares. It also estimates operating revenues in July to be sequentially better.

Furthermore, Southwest expects its second-quarter 2021 capacity to grow 87% year-over-year. Further, it forecasts August 2021 capacity to increase by approximately 39%.

Based on the improving operating revenues trends, the company has narrowed its average core cash burn (a measure of liquidity) expectation to the range of $1-$2 million from $1-$3 million expected earlier.

Further, based on optimistic revenue trends and recent fleet modernization plans, Southwest Airlines has joined hands with Boeing Co. (BA) to add 34 737 MAX 7 aircraft to the U.S. airline’s 2022 orders, taking the total order for the MAX 7 aircraft to 234.

Following the update, Citigroup analyst Stephen Trent reiterated a Hold rating on the stock.

Trent thinks that while the re-fleeting news is positive, the airline industry may find it difficult to balance capacity and demand in the current post-COVID scenario.

Overall, the stock has a Strong Buy consensus rating based on 10 Buys and 3 Holds. The LUV average analyst price target of $70 implies 18.9% upside potential from current levels. Shares of LUV have jumped 55% over the past year.

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