Airline stocks have been a little volatile the past few weeks because of fears that Ebola concerns would reduce travel. While the disease is being taken seriously by health officials all over the world the truth is that outside of West Africa there is not a global outbreak.
Those Ebola cases that have turned up outside Africa have been dealt with pretty efficiently for the most part. Fears of a wide spread contagion that threatens air travel seems a little premature at this point. As the fear spread and airline stocks began to trade wildly, it seems someone forgot to tell Southwest Airlines (LUV) that there was a problem. Southwest stock recovered quickly and just went marching back towards new 52-week highs.
Southwest reported earnings last week and posted yet another positive earnings surprise by reporting a profit of 55 cents per share when the analysts were expecting just 53 cents per share for the third quarter. The surprise was yet another record quarter for Southwest. Total operating revenues were $4.8 billion in spite of a small drop in trips and fewer seats flown in the quarter. A 386 basis point improvement in margins was driven by strong revenues and lower aviation fuel expenses in the quarter.
CEO Gary Kelly think that the fourth quarter will also show strong performance on the cost side and reported that bookings for the current quarter look strong so far. All in all, Southwest reported that revenues grew by 5.6% to $4.8 billion while profits jumped by 27% compared to the third quarter of 2013.
Southwest Airlines also announced that it had started offering international flights during the quarter. Southwest started with popular vacation routes formerly serviced by AirTran including Oranjestad, Aruba, Montego Bay, Jamaica, the Bahamas and Cancun, Mexico.
In November, Southwest will begin service to Punta Cana, Dominican Republic, and Mexico City, Mexico. Travelers will like the cost and service offered by Southwest on the international flights as much as they have domestically and Southwest should strong growth in this expansion effort.
There have been several threats of declining air travel in the past year and Southwest has pretty much ignored them and continued to power higher with the shares more than doubling in the past 12 months.
By focusing on the numbers instead of the stories we have been able to stay locked in with the stock as the fundamental shave just ignored the noise and continued to improve. Portfolio Grader has ranked Southwest stock a “strong buy” the entire time, and shares of Southwest share still earn an “A.” Southwest is a great example of a best of the best stock that could propel your portfolio to market-beating returns.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family 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.
