US$27.32: That's What Analysts Think Southwest Airlines Co. (NYSE:LUV) Is Worth After Its Latest Results

Shareholders might have noticed that Southwest Airlines Co. (NYSE:LUV) filed its first-quarter result this time last week. The early response was not positive, with shares down 9.7% to US$26.84 in the past week. Revenues came in at US$6.3b, in line with expectations, while statutory losses per share were substantially higher than expected, at US$0.39 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Southwest Airlines

Taking into account the latest results, the current consensus from Southwest Airlines' 17 analysts is for revenues of US$28.0b in 2024. This would reflect a reasonable 4.9% increase on its revenue over the past 12 months. Per-share earnings are expected to surge 88% to US$1.23. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$28.4b and earnings per share (EPS) of US$1.33 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

The average price target fell 6.5% to US$27.32, with reduced earnings forecasts clearly tied to a lower valuation estimate. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Southwest Airlines, with the most bullish analyst valuing it at US$38.00 and the most bearish at US$19.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We can infer from the latest estimates that forecasts expect a continuation of Southwest Airlines'historical trends, as the 6.6% annualised revenue growth to the end of 2024 is roughly in line with the 7.6% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 6.6% annually. It's clear that while Southwest Airlines' revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Southwest Airlines. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Southwest Airlines. Long-term earnings power is much more important than next year's profits. We have forecasts for Southwest Airlines going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Southwest Airlines you should be aware of, and 1 of them is concerning.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.