Bump: Southwest Airlines (LUV)
Southwest Airlines (LUV) delivered record earnings in the fourth quarter — 30 cents per share, compared to just 11 cents a share for the same quarter in 2012. That said, LUV stock, Wall Street’s favorite of the airline stocks, is likely to get walloped this year.
The carrier won big when it picked up the lion’s share of the slots the new American Airlines (AAL) had to divest at Washington D.C.’s Regan airport. However, LUV is facing headwinds from its strategy shift to international, as well as growing pains from its AirTran integration this year.
LUV is struggling to grow into a legacy model, and the AirTran integration and half-billion dollar international reservations system (not to mention the international expansion itself) is likely to eat its lunch in the near term.
LUV has soared 84% over the past year, but the air is looking thin at that altitude. That’s evident by the forward P/E of more than 13 — one of the highest among airline stocks.