Consumer Discretionary

Jefferies analyst Sheila Kahyaoglu upgrades Southwest Airlines (NYSE:LUV) from Underperform to Hold and raises the price target from $20 to $28.

Shares of Southwest Airlines (LUV) tumbled nearly 15% on Tuesday after the carrier tempered its revenue expectations for the first quarter and said that Boeing (BA) delivery challenges will impact its 2024 capacity. Southwest now sees revenue per available seat mile coming in flat to up 2% in the first quarter, compared with a prior view of 2.5% to 4.5% growth, according to a filing with the Securities and Exchange Commission. Roughly one point of the guidance decrease is due to higher-than-expected “completion factors in February and March,” with the remainder reflecting lower close-in leisure passenger volume. With a 99.3% completion factor since Feb. 1, the airline now expects first-quarter capacity to be up 11% versus a prior view of 10%. “The company’s first quarter 2024 operational performance has been strong, thus far, and flight cancellations have been lower than was expected in late January, when first quarter 2024 capacity

Southwest Airlines is one of the most mentioned companies in the U.S. across all news items in the last 12 hours, according to Factiva data. Southwest is getting fewer aircrafts this year than it previously expected as issues at Boeing intensify. Southwest, which strictly uses Boeing aircraft, said in a filing with the Securities and Exchange Commission that Boeing told the airline to expect 46 deliveries of the 737-8 plane in 2024, less than the previously expected 79. “As a result of Boeing’s continued challenges, the company expects the delivery schedule to be fluid and, therefore, plans to reduce capacity and re-optimize schedules, primarily for the back half of 2024, which will likely result in at least a one point reduction to the company’s full year 2024 capacity plans on a year-over-year basis,” Southwest said. Dow Jones & Co. owns Factiva.

CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows: Our 12-month target of $30, cut $2, is 19.9x our ’25 EPS view (cut to $1.51 from $1.53; we cut ’24’s to $1.05 from $1.23), below LUV’s historical average, on persistent aircraft delivery delays. Shares are down ~15% today after LUV announced that it plans to trim its ’24 capacity outlook, while revising its Q1 24 guidance. LUV announced today that it expects to see around 42% fewer deliveries of Boeing’s (BA 184 **) 737 MAX aircraft in ’24 than it had initially expected (46 new aircraft deliveries vs. prior guidance of 79 aircraft), given the persistent regulatory scrutiny that BA has faced since a door panel blew off mid-flight on an Alaska Air Group (ALK 39 ***) operated flight in January, making it the second time

Southwest Airlines Updates Q1 Guidance: Sees RASM Flat To Up 2% (Prior Est. Up 2.5%-4.5%), Sees Economic Fuel Costs Per Gallon $2.95-$3.00 (Prior Est. $2.70-$2.80)