Southwest Airlines Hikes Revenue Forecast on Strong Holiday Demand. Why the Stock Is Falling.
Southwest Airlines
hiked its fourth-quarter revenue guidance amid strong holiday travel demand, but that wasn’t enough to keep the stock’s recent rally going.
The shares, which are up 31% over the past month and 19% in December, pointed 2% lower ahead of the open Wednesday. There were plenty of positives from the low-cost carrier’s guidance update, but after the recent run investors appeared more inclined to pick out a negative.
They found one—the airline lifted its fuel-cost guidance to between $3 and $3.10 per gallon, from an earlier $2.90 to $3 range. The airline also moderated plans to increase capacity beyond 2024.
The positives, however, have largely been priced in following several carrier updates—notably one from
JetBlue Airways
—and holiday travel data.
Thanksgiving was kind to airlines as millions of people took to the skies in a record-breaking holiday period. The Sunday after Thanksgiving was the busiest day in U.S. aviation history as the Transportation Security Administration screened more than 2.9 million passengers at airports across the country.
Southwest said it now expects revenue per available seat mile to fall between 9% and 10% year over year in the fourth quarter, at the better end of its previous guidance range for a drop of between 9% and 11%.
“Fourth-quarter 2023 travel demand and yields continue to be healthy. Leisure demand remains strong with record revenue over the Thanksgiving holiday period,” the company said. It expects to report record fourth-quarter operating revenue and passengers.
The airline stuck to its capacity expectations for 2024—an increase of between 10% and 12% in the first quarter and between 6% and 8% for the full year. However, it trimmed annual goals for capacity beyond 2024 and now sees low-to-mid single-digit available seat mile growth, from mid-single-digit growth.
Write to Callum Keown at [email protected]
Read the full article here