Southwest Falls on Raymond James Downgrade to Market Perform - TheStreet

Shares of Southwest Airlines (LUV) - Get Report  fell 1.9% to $52.22 Monday after Raymond James downgraded the airline to market perform from outperform.

In a note to investors, analysts said "while we are stepping onto the sidelines until further clarity on the timing of a MAX solution we are not negative on LUV shares."

In mid-February, the airline had to contend with a rise in last-minute flight cancellations due to maintenance issues it blamed on a dispute with mechanics. The airline has since reached a tentative agreement with the mechanics' union. Last month, Southwest grounded the troubled Boeing (BA) - Get Report 737 MAX 8 jet. The airline has 34 MAX 8 planes in its fleet, more than any other U.S. carrier.

The Raymond James note described the pressures of the mechanics' union dispute and the MAX grounding as "one time in nature," adding that "we remain confident in Southwest's ability to maintain its longer term superior margins, "free cash flow" profile, and low leverage while capitalizing on technology catch-up and international growth opportunities."

Last month, a passenger-less Southwest 737 MAX had to make an emergency landing in Florida. Pilots flying the aircraft to a storage facility in California were forced to make an emergency landing in Orlando, where the plane departed, after experiencing engine trouble shortly after takeoff. Southwest said the difficulties were not related to the plane's troubled Maneuvering Characteristics Augmentation System, or MCAS automated flight control system flight software system.

Bank of America Merrill Lynch cut its rating on Boeing from buy to neutral and lowered its price objective to $420 from $480. Boeing said it would slow production of the MAX aircraft following two fatal accidents that have raised serious concerns for the aircraft's safety.