CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
We cut our 12-month target to $24 from $36, 12.2x our ’24 EPS view (cut to $1.97 from $3.24; ’23’s cut to $1.24 from $2.16), slightly above LUV’s ’18-’19 P/E average of 12x. Q3 EPS of $0.38 vs. $0.50, missed consensus by $0.01. Revenues grew 5% Y/Y on more than 12% capacity due to weaker load factors (~81% vs. 85% in Q3 22). LUV revised its ’23 outlook, with expected fuel rising by 5.5% (midpoint of $2.90/g vs. the prior midpoint of $2.75/g) due to the recent uptick in energy prices. The EIA estimates WTI pricing to average $80/b in ’23 (vs. $95/b in ’22) and $91/b in ’24. LUV has hedged 50% of its expected ’23 fuel consumption at a midpoint of $2.90 and 55% for ’24, by our estimation, at a midpoint of $2.98; we estimate its total fuel cost/g to be around $2.88/g in ’23 and $3.02/g in ’24. LUV noted it plans to look at cutting capacity in ’24 to lower unit costs. However, we don’t think it will be enough to reduce costs given that a labor deal has yet to be made and could match that of rival carriers.