Southwest Airlines Forecasts Significant Profit Surge for 2026
Written by Emily J. Thompson, Senior Investment Analyst
Source: CNBC
- Profit Forecast Upgrade: Southwest Airlines anticipates adjusted earnings of at least $4 per share for 2026, significantly exceeding analysts' expectations of $3.19, indicating strong profitability amid its business model transformation.
- Revenue Growth Outlook: The airline expects capacity growth of 2% to 3% compared to 2025, while first-quarter revenue per seat mile is projected to rise by 9.5%, surpassing the 8.5% analysts expected, reflecting robust market demand.
- Net Income Increase: In the fourth quarter, Southwest's net income rose nearly 24% year-over-year to $323 million, with revenue increasing by 7.4% to $7.44 billion, demonstrating ongoing improvements in revenue and profitability.
- Business Model Transformation: The company has undergone significant changes over the past two years, including ending its open boarding policy and introducing assigned seating, aimed at enhancing profitability and aligning with competitors.
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Analyst Views on LUV
Wall Street analysts forecast LUV stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for LUV is 44.21 USD with a low forecast of 34.00 USD and a high forecast of 60.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
14 Analyst Rating
4 Buy
9 Hold
1 Sell
Hold
Current: 40.860
Low
34.00
Averages
44.21
High
60.00
Current: 40.860
Low
34.00
Averages
44.21
High
60.00
About LUV
Southwest Airlines Co. (Southwest) operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. The Company's fare products include four categories: Wanna Get Away, Wanna Get Away Plus, Anytime, and Business Select to provide customers options when choosing a fare. It also offers ancillary services, such as EarlyBird Check-In, Upgraded Boarding, and transportation of pets and unaccompanied minors, in accordance with Southwest’s respective policies. Its Rapid Rewards loyalty program enables program members to earn points for every dollar spent on Southwest base fares, also including purchases paid with LUV Vouchers, gift cards, or flight credit, with no portion of the purchase price paid with Rapid Rewards points. It operates over 803 Boeing 737 aircraft in its fleet and serves 117 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Southwest Airlines 2026 Profit Forecast Exceeds Expectations
- Profit Forecast Upgrade: Southwest Airlines projects an adjusted profit per share of about $4 for 2026, surpassing Wall Street's expectation of $3.45, indicating a significant enhancement in profitability that could attract more investor interest.
- Stock Surge: The airline's shares surged nearly 19% on Thursday, marking the best single-day performance in its 50-year history as a public company, closing at $48.50, the highest since November 2021, reflecting optimistic market sentiment regarding the company's future growth potential.
- Strategic Transformation: The company is gradually moving away from its traditional model by implementing bag fees, assigning seats, and extending flight credit expiration, while also launching free Wi-Fi in partnership with T-Mobile, enhancing customer experience and expected revenue growth.
- Positive Market Reaction: Morgan Stanley raised its price target on Southwest Airlines to $55, maintaining an 'Overweight' rating, believing the company has shed post-pandemic strategic execution risks, showcasing strong market competitiveness.
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Southwest Airlines Q4 Earnings Exceed Expectations
- Earnings Highlights: Southwest Airlines reported Q4 revenue of $7.44 billion, a 7.4% year-over-year increase, although it fell short of the $7.50 billion consensus; however, the EPS of 58 cents exceeded expectations of 57 cents, indicating strong profitability.
- Outlook Guidance: The company issued a bullish outlook for 2026, projecting Q1 EPS of 45 cents or higher compared to the Street estimate of 34 cents, with full-year EPS guidance exceeding $4, representing over a 300% improvement from the $3.19 estimate.
- Management Commentary: CEO Bob Jordan stated during the conference call that 2026 is expected to be a year of margin expansion and higher earnings than in 2025, while management plans to keep headcount expenses flat at 2025 levels, emphasizing cost control.
- Stock Performance: Southwest Airlines shares surged 15.76% on Thursday, reaching an intraday high of $47.30, surpassing the 52-week high of $45.02, reflecting strong market confidence in the company's growth potential.
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