Southwest Airlines (LUV) Lags In After-Hours Trading

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Southwest Airlines ( LUV) as a post-market laggard candidate. In addition to specific proprietary factors, Trade-Ideas identified Southwest Airlines as such a stock due to the following factors:

  • LUV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $254.8 million.
  • LUV is down 2.1% today from today's close.

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More details on LUV:

Southwest Airlines Co. operates passenger airlines that provide scheduled air transportation services in the United States. As of December 31, 2012, the company operated 694 aircraft, including 606 Boeing 737 aircraft and 88 Boeing 717 aircraft. The stock currently has a dividend yield of 0.7%. LUV has a PE ratio of 22.0. Currently there are 9 analysts that rate Southwest Airlines a buy, 2 analysts rate it a sell, and 2 rate it a hold.

The average volume for Southwest Airlines has been 6.2 million shares per day over the past 30 days. Southwest Airlines has a market cap of $23.2 billion and is part of the services sector and transportation industry. The stock has a beta of 0.66 and a short float of 3.1% with 2.61 days to cover. Shares are up 78.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Southwest Airlines as a buy. 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 ratings report include:
  • 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 ($1.80 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 45.5%. 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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