Will Southwest Airlines (LUV) Stock Be Affected By Possible Canadian Expansion?

NEW YORK (TheStreet) -- Executives at Southwest Airlines Co. (LUV) are said to be considering entering the Canadian market as the company looks to expand its presence in international destinations, the Globe and Mail reports.

Southwest has met with officials at some Canadian airports and told the Globe and Mail that "they make a compelling argument as to why we should serve Canada."

Southwest's CEO Gary Kelly said he'd be surprised if the company "weren't in Canada by at least the end of the decade."STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Canada isn't the only destination the company is looking to expand into, at least 50 possibilities are being considered, but the company said no matter where it goes its intention is to lower fares, the Globe and Mail added.

Shares of Southwest are higher by 0.76% to $33.16 in mid-morning trading on Wednesday.

Separately, TheStreet Ratings team rates SOUTHWEST AIRLINES as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SOUTHWEST AIRLINES (LUV) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SOUTHWEST AIRLINES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SOUTHWEST AIRLINES increased its bottom line by earning $1.06 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($1.79 versus $1.06).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Airlines industry average. The net income increased by 107.6% when compared to the same quarter one year prior, rising from $224.00 million to $465.00 million.
  • The revenue growth significantly trails the industry average of 47.6%. Since the same quarter one year prior, revenues slightly increased by 7.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that LUV's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Airlines industry and the overall market on the basis of return on equity, SOUTHWEST AIRLINES has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: LUV Ratings Report

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he and Stephanie Link think could be potentially HUGE winners. Click here to see the holdings for FREE.

More from Markets

Dow and S&P 500 Finish Higher Amid Strong Corporate Earnings

Dow and S&P 500 Finish Higher Amid Strong Corporate Earnings

Veteran Foreign Affairs Expert Ian Bremmer Reveals How to Price Political Risk

Veteran Foreign Affairs Expert Ian Bremmer Reveals How to Price Political Risk

Investors Shouldn't Be Worried About Trump's Trade Tariffs: Ian Bremmer

Investors Shouldn't Be Worried About Trump's Trade Tariffs: Ian Bremmer

3 Hot Reads From TheStreet's Top Premium Columnists

3 Hot Reads From TheStreet's Top Premium Columnists

NYSE Suspends Trading for Some Shares of Nasdaq-Listed Amazon, Alphabet

NYSE Suspends Trading for Some Shares of Nasdaq-Listed Amazon, Alphabet