Time New York: Tue 27 Jun 08:29 am  |  Save 15% on H&R Block Online

  
caticonslite_bm_alt

Here’s Why You Should Retain Southwest Airlines (LUV) Now

Zacks

Shares of Southwest Airlines Co. LUV gained 6.05% in the last one month, outperforming the Zacks categorized Transportation – Airline industry’s gain of 4.62% over the same period.

Southwest Airlines' employee-friendly approach is impressive. In Feb 2017, the carrier paid $586 million to its employees as part of its profit-sharing plan for 2016. The 2016 payment equates to approximately 13.2% of each employee's earnings in the year. We are also appreciative of the company's efforts to enhance shareholders’ wealth through dividends and share buybacks. In the first quarter of 2017, the company returned $673 million to shareholders through a combination of dividends and share repurchases.

At the end of the first quarter, Southwest Airlines had cash and cash equivalents of $1,851 million, compared with $1,680 million at the end of 2016. As of Mar 31, 2017, the company had long-term debt (less current maturities) of $2,781 million, compared with $2,821 million at the end of 2016.The carrier generated free cash flow of $1.2 billion in first-quarter 2017.


The carrier's second-quarter guidance for operating revenue per available seat miles also raises optimism. The metric is expected to grow in the band of 1% to 2% on a year-over-year basis.

The carrier posted impressive traffic numbers for the month of April. Traffic (measured in revenue passenger miles or RPMs) rose 8.4%, while consolidated capacity (or available seat miles/ASMs) inched up 7.6%. Load factor (percentage of seats filled by passengers) increased 60 basis points to 84% in Apr 2017, as traffic growth outpaced capacity expansion.

In view of the positives, we believe investors should hold onto Southwest Airlines' stock for now.

Zacks Rank & Key Picks

Southwest Airlines currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the airline space are Deutsche Lufthansa AG DLAKY, Ryanair Holdings PLC RYAAY and SkyWest, Inc. SKYW. All of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Deutsche Lufthansa and Ryanair Holdings gained over 43% and 21%, respectively, on a year-to-date basis. SkyWest has an impressive earnings history. The company beat the Zacks Consensus Estimate in each of the last four quarters, with a positive earnings surprise of 13.81%.

5 Trades Could Profit "Big-League" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.