Southwest surges 15% on boosted profit guidance
Airline shares post best one-day gain in 17 years as company raises earnings outlook
Southwest Airlines shares soared 15.1% on Thursday, marking the stock's best one-day performance in 17 years, after the low-cost carrier boosted its profit guidance amid improving travel demand and easing operational pressures.
The Dallas-based airline's stock jumped $6.18 to $47.04, extending its gain above the 52-week high of $45.02 set earlier in the month. The surge pushed Southwest's market capitalization to $21.7 billion, with trading volume significantly above average levels.
The rally came after Southwest raised its profit guidance, signaling confidence in its ability to navigate a challenging operating environment that has weighed on airlines in recent quarters. The guidance revision reflects stronger-than-expected revenue trends and the company's ongoing cost management initiatives.
Southwest, which operates exclusively in the domestic market with a point-to-point route network, has been working to stabilize operations following pandemic disruptions. The improved outlook suggests those efforts are yielding results, with analysts noting that the carrier is benefiting from resilient consumer travel demand despite broader economic concerns.
The stock's dramatic rise broke above key technical levels, including the 50-day moving average of $39.09, which the shares had been trading below until mid-January. Thursday's gain marks the largest single-day percentage increase for Southwest since 2009, according to market data.
Southwest's performance stands in contrast to broader airline sector trends, which have faced pressure from high fuel costs, labor expenses, and capacity constraints. The company's ability to raise guidance while many competitors remain cautious highlights its unique position as a low-cost operator with strong brand loyalty among leisure travelers.
The carrier's valuation metrics have adjusted following the surge, with shares now trading at a forward price-to-earnings ratio of 15.38 times expected earnings, down from a trailing multiple of 65.62 times. Analysts have a consensus target price of $41.93 on the stock, with ratings split among buy, hold, and sell recommendations, according to market data.
Southwest's recent quarterly results showed revenue of $27.6 billion over the trailing 12 months, with a profit margin of 1.38%. The company has faced pressure from rising costs, which compressed quarterly earnings growth by 9.1% year-over-year despite modest revenue growth of 1.2%.
The dividend yield of 1.71% provides additional income for shareholders, with the most recent payout of $0.72 per share distributed on January 16. Southwest's focus on operational efficiency and customer service has helped it maintain a loyal customer base, even as it works to modernize its fleet and improve scheduling reliability.
Looking ahead, investors will be watching for evidence that the improved profit guidance translates into actual earnings performance when Southwest reports quarterly results. The company's ability to sustain momentum amid seasonal travel patterns and potential economic headwinds will be key to determining whether Thursday's rally marks the beginning of a sustained recovery.
The airline sector faces ongoing challenges including aircraft delivery delays, staffing constraints, and volatile fuel prices. However, Southwest's domestic-focused strategy and cost structure may provide relative stability compared to network carriers with greater international exposure.