LUV: Buy Southwest Airlines as It Ascends

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In my opinion, Southwest Airlines (LUV) is by far the most efficient passenger airline in the U.S. With its third-quarter earnings report just around the corner, can LUV fly higher from here?

Company Overview

Southwest airlines LUV stock to buySouthwest is known as America’s largest low-fare carrier as it serves more customers than any other airline in the country. With nearly 700 aircrafts in its fleet, Southwest serves 96 destinations across 41 states, Washington, D.C. and Puerto Rico.

Southwest Airlines has been known for having some of the most affordable fares — and highest customer satisfaction ratings — in the business.

Now that Southwest Airlines is integrating AirTran Airways into its operations, LUV recently offered international flights for the first time ever. Recently Southwest Airlines inaugurated service to three Caribbean destinations: Aruba, Jamaica and The Bahamas.

Earnings Buzz

Southwest Airlines is slated to report third-quarter results on or around October 23, and it’s shaping up to be a solid report, with analysts calling for $0.50 earnings-per-share on $4.77 billion in revenue.

Thereofre, Southwest Airlines could achieve 47.1% annual earnings growth and 5% sales growth year over year. Better yet, analysts have been revising their EPS estimates higher over the past 90 days, with the consensus estimate having risen 16% during that time.

I always like seeing these kind of analyst earnings revisions because they tend to precede solid earnings surprises. Looking ahead to fiscal 2014, Southwest Airlines is headed for 4.7% annual sales growth and 60.7% earnings growth, above the 30.1% industry average for 2014 bottom-line growth.

Current Ratings

In the past year, Southwest Airlines has taken off (in more ways than one). Following its international debut, institutional interest in LUV stock has remained strong. So, LUV earns an “A” for its Quantitative Grade.

Southwest Airlines is also going strong in regards to its fundamental metrics, including earnings growth, operating margin growth and analyst earnings revisions (all “A-rated”).

Additionally, Southwest Airlines scores “Bs” in earnings surprises and return on equity. However, Southwest Airlines has room for improvement as it scores “Cs” in sales growth and cash flow as well as a “D” in earnings momentum. LUV receives a “B” for its Fundamental Grade.

As of this posting, Sept. 17, 2014, I consider LUV an “A-rated buy.”

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


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