Southwest Airlines Earnings Cheat Sheet: Swinging to a Loss After Two Quarters of Profit

S&P 500 (NYSE:SPY) component Southwest Airlines Co. (NYSE:LUV) reported its results for the third quarter. Southwest Airlines is a passenger airline that provides air transportation in the United States.

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Southwest Airlines Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $140 million (18 cents per diluted share) in the quarter. Southwest Airlines Co. had a net income of $205 million or 27 cents per share in the year earlier quarter.

Revenue: Rose 35.1% to $4.31 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: LUV reported adjusted net income of 15 cents per share. By that measure, the company beat the mean estimate of 13 cents per share. Analysts were expecting revenue of $4.23 billion.

Quoting Management: Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, “Excluding special items, third quarter 2011 operating income was $285 million, and third quarter 2011 net income was $122 million. Total third quarter operating revenues were very strong and reached an all-time quarterly record of $4.3 billion. Passenger revenues were driven by strong load factors, revenue yields, and unit revenues, which were all third quarter records. Third quarter passenger unit revenues increased approximately six percent, compared to third quarter last year (on a combined basis as defined below). Despite the cautious economic outlook, our booking trends remain strong. Importantly, business travel has remained stable since spring.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 23.6%, with the biggest boost coming in the most recent quarter when revenue rose 35.1% from the year earlier quarter.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $161 million in the second quarter, a profit of $5 million in the first quarter and $131 million in the fourth of the last fiscal year.

The company topped expectations last quarter after falling short of forecasts in the second quarter with net income of 15 cents versus a mean estimate of net income of 21 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 20 cents per share to 7 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from 64 cents a share to 42 cents over the last ninety days.

Competitors to Watch: AirTran Holdings, Inc. (NYSE:AAI), JetBlue Airways Corp. (NASDAQ:JBLU), Delta Air Lines, Inc. (NYSE:DAL), AMR Corporation (NYSE:AMR), US Airways Group, Inc. (NYSE:LCC), Allegiant Travel Company (NASDAQ:ALGT), Republic Airways Hldgs. Inc. (NASDAQ:RJET), SkyWest, Inc. (NASDAQ:SKYW), Alaska Air Group, Inc. (NYSE:ALK), and United Continental Hldgs., Inc. (NYSE:UAL).

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(Source: Xignite Financials)