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 $32, up $8, is 21x our ’25 EPS view (started at $1.53; ’24’s cut to $1.23 from $1.97), below LUV’s five-year historical average of 30x. We believe a discount is merited due to rising unit costs. Q4 EPS of $0.37 vs. a loss per share of $0.38, beat consensus by $0.24. Revenues grew 12% Y/Y while capacity rose by 21% Y/Y. LUV released its ’24 outlook, expecting its unit costs to rise 6%-7% on 6% capacity growth; however, we think unit costs could grow more than LUV expects, given the recent labor deal increasing its pilots’ pay by +50% over the next five years, while persistent delays in aircraft deliveries continue to keep maintenance costs elevated. In addition, LUV anticipates capex to be in the range of $3.5B-$4B in ’24 (vs. $3.5B in ’23), and we estimate LUV with negative FCF in the range of -$1.3B in ’24 (vs. -$356M in ’23); with $3B in debt maturing in ’25, we think LUV might have to dip into its cash on hand ($9.3B at the end of ’23) should cash flow generation continue to decline.