Efficiency Will Be The Focus Of Southwest Airlines Q4 2015 Earnings

Southwest Airlines is due to report fourth quarter 2015 earnings on 21st January 2016 before market open.

The company expects to report strong EPS growth but only modest revenue growth.

Investor attention will, however, be focused more strongly on the company’s efficiency metrics as it continues to add capacity and expand into international markets.

Efficiency Will Be Focus Of Southwest Airlines Q4 2015 Earnings

Low-cost carrier Southwest Airlines (NYSE:LUV) is expected to report fourth quarter 2015 earnings on 21^st January 2016 before market open. The consensus amongst analysts is for the company to report EPS of $0.9 vs.$0.59 for the previous year’s comparable quarter. During its third quarter earnings call, Southwest said that it expects fourth quarter revenue to increase ~1% Y/Y, which implies the company expects operating revenue of $$4.646B. Southwest Airlines has managed to beat or exceed earnings expectations over the last four consecutive quarters and the stock has a strong buy recommendation on Wall Street.

LUV-1

Southwest Quarterly Earnings Surprise History

Fiscal
Quarter End Date
Reported Earnings
Per Share Consensus
EPS* Forecast %
Surprise Sep2015 10/22/2015 0.94 0.92 2.17 Jun2015 07/23/2015 1.03 1.03 Met Mar2015 04/23/2015 0.66 0.64 3.13 Dec2014 01/22/2015 0.59 0.54 9.26

Source: NASDAQ

Effects of low oil prices

In the current environment of ultra-low fuel prices, investors have been judging airlines more heavily based on their RASM, or Revenue Per Available Seat-Mile, which is an efficiency metric. Low-fuel prices have two sides to them. On one hand, they allow airlines to realize significant cost savings which frequently trickles down to the bottom line. Fuel costs comprise the biggest cost component for major airlines and can account for more than 30% of an airline’s operating expenses.