NEW YORK ( TheStreet) -- Southwest Airlines (NYSE: LUV) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 31.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.76 is somewhat weak and could be cause for future problems.
- SOUTHWEST AIRLINES has improved earnings per share by 11.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SOUTHWEST AIRLINES reported lower earnings of $0.24 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus $0.24).
- Net operating cash flow has increased to $400.00 million or 48.69% when compared to the same quarter last year. Despite an increase in cash flow of 48.69%, SOUTHWEST AIRLINES is still growing at a significantly lower rate than the industry average of 197.14%.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Airlines industry average. The net income increased by 16.0% when compared to the same quarter one year prior, going from $131.00 million to $152.00 million.
-- Written by a member of TheStreet RatingsStaff