Is a Beat in the Cards for Southwest Airlines in Q4 Earnings?

Core Viewpoint - Southwest Airlines Co. (LUV) is expected to report its fourth-quarter 2024 results on January 30, with positive earnings estimates and growth indicators despite facing some operational challenges [1]. Financial Performance - The Zacks Consensus Estimate for LUV's fourth-quarter 2024 earnings has been revised upward by 21.6% to 45 cents per share, indicating a 21.62% growth from the previous year [2]. - LUV has surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average earnings beat of 111.62% [3]. Revenue Insights - The revenue estimate for LUV's fourth-quarter 2024 is set at $6.95 billion, reflecting a year-over-year growth of 1.84%, supported by strong leisure demand and yield strength [4]. - LUV anticipates its revenue per available seat mile (RASM) to increase by 5.5%-7% year-over-year, an improvement from the previous forecast of 3.5%-5.5% [5]. Operational Factors - The growth in unit revenues is attributed to consistent travel demand and effective revenue management strategies, including network optimization and capacity rationalization [6]. - However, production delays at Boeing, increased labor and airport costs, and higher fuel expenses are expected to impact LUV's bottom line, with CASM (excluding fuel and other costs) projected to rise by 11-13% compared to the previous year [7]. Fuel Cost Projections - The expected economic fuel cost per gallon for the fourth quarter is now between$ 2.35 and $2.45, up from the prior estimate of$ 2.25 to $2.35, which poses a challenge for profitability [8]. Earnings Prediction - The model predicts an earnings beat for Southwest Airlines, supported by a positive Earnings ESP of +6.78% and a Zacks Rank of 2 (Buy) [9].