Can Southwest Airlines Outperform Against Economic Headwinds?

The company’s quarter-over-quarter performance over the last five periods is also slightly unattractive. Southwest did post a 15.6 percent revenue jump in the June (second) quarter, but was slightly worse off in September of 2012 than in 2011.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 4,311 4,108 3,991 4,616 4,309
Diluted EPS ($) (0.18) 0.19 0.13 0.30 0.02


Year-over-year earnings for the third quarter were a solid beat, if still barely positive. Third-quarter net income was heavily impacted by $81 million in unfavorable special items, without which earnings would have been $0.13 per diluted share.

E = Excellent Poor Performance Relative to Peers

Many investors favor return on equity as a key metric to diagnose how well a company is performing. Unfortunately, Southwest’s operational performance compares unfavorably to its competitors. LUV has an ROE of 7.34 percent, compared to Delta Air Lines Inc. (NYSE:DAL) with an ROE currently at a whopping 234.27 percent, and JetBlue Airways Corporation (NASDAQ:JBLU), which has an ROE of 8.31 percent.

Operating margins are also critical for stock evaluation. On this metric, Southwest stacks up unfavorably to its competitors with a margin of 3.99 percent. This compares to Delta with a margin of 6.88 percent, and JetBlue with a margin of 8.41 percent.

However, Southwest’s low margins are indicative of its status as a low-cost carrier…