Shares of Southwest Airlines (NYSE:LUV) are in focus today after the company updated its financial outlook. Leisure demand remained strong during the Thanksgiving period. Further, Close-in bookings came in at the higher end of Southwest’s expectations.
Consequently, it now expects record operating revenues and passenger numbers for the fourth quarter. In Q4, the available seat miles (ASM) are expected to be up 21% year-over-year. Further, operating revenue per available seat mile (RASM) is seen declining by 9% to 10% versus the prior outlook of a 9% to 11% decline.
In addition, capacity during the first quarter of Fiscal 2024 is expected to increase by 6% to 8%. However, Southwest has moderated its capacity goals beyond 2024. It now aims for a low-to-mid-single-digit year-over-year ASM growth, compared to the earlier target of mid-single-digit growth. Moreover, economic fuel costs for the fourth quarter are expected to hover between $3 and $3.10. Southwest earlier pegged this figure between $2.90 and $3.
Still, recent strong travel trends have prompted optimistic guidance updates among airlines. Delta (NYSE:DAL) expects revenue growth of about 20% for Fiscal Year 2023, while JetBlue (NASDAQ:JBLU) anticipates revenue growth of 4% to 5% for the full year.
What is the Future of LUV Stock?
This change of fortune has driven LUV shares nearly 32% higher over the past month. However, the Street has a Hold consensus rating on Southwest Airlines, and the average LUV price target of $26.92 implies a potential downside of 11.2% in the stock.
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