Why Southwest Airlines Stock Tumbled Today

Core Viewpoint - Southwest Airlines stock experienced a significant decline of 11.9% after missing analyst expectations for both sales and earnings in Q2 [1][3] Financial Performance - Southwest Airlines reported adjusted earnings of $0.43 per share, missing the expected $0.51, with quarterly sales of $7.24 billion, slightly below the anticipated $7.29 billion [1][3] - Actual earnings per share, calculated under GAAP, were $0.39, representing a 33% decrease from the previous year, despite only a 1.5% decline in revenue [3] - The decline in profit margins was attributed to a 9% increase in salaries, wages, and benefits, along with an 11% rise in landing fees, while fuel costs had decreased significantly [3] Future Guidance - Management projects earnings of at least $600 million for the year, excluding interest and taxes, and considers the stock to be undervalued [4] - A $2 billion stock buyback program has been announced, aimed at retiring more shares following the recent sell-off [4] Valuation Metrics - The stock is currently priced at 39 times earnings, which may appear expensive, but analysts forecast a potential doubling of profits next year to $2.25 per share [4] - With a forward earnings multiple of 15, no net debt, and a dividend yield of 1.9%, there are indications that Southwest stock could be a potential buy [5]