Southwest Airlines (LUV) Recovers From 'Rough' Day, Bloomberg TV Reports
NEW YORK (TheStreet) -- Southwest Airlines (LUV) - Get Report stock has recovered from Thursday's seven-year low on Friday, shares plunged yesterday after the company reported weak 2016 second quarter earnings, said competition would drive down its fares and as a computer outage cancelled 1,400 flights.
"Overall yesterday was a pretty rough day for Southwest," Bloomberg TV's George Ferguson reported on "Bloomberg Markets" today.
The airline operator reported 2016 second quarter earnings of $1.19 per share on revenue of $5.38 billion, missing analysts' expectations of earnings of $1.21 per share on $5.41 in revenue.
Air fares are falling as companies try to take market share, creating a headwind for all airlines including Southwest, according to Ferguson.
Southwest warned investors yesterday that in its third quarter the company would be even less profitable, Ferguson noted.
"[Airlines are] adding capacity and lowering the price of fares to fill airplanes. That is starting to diminish revenue pretty hard now," he explained.
Airlines now need to push "fares to rise. That's going to make revenues rise," Ferguson commented.
As for the server outage, the company is "a well regarded airline so I think Southwest will move past this pretty well. These things happen from time to time," he added.
Shares of Southwest ended trading higher by 1.34% to $37.82 today.
Separately, TheStreet Ratings rated Southwest as a "buy" with a score of B+.
This is driven by several positive factors, which can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, increase in net income, expanding profit margins and good cash flow from operations. TheStreet Ratings feels its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
You can view the full analysis from the report here: LUV
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.