Southwest Airlines (LUV) Stock Up in Pre-Market Trading Today on Capacity Increase

NEW YORK (TheStreet) -- Shares of Southwest Airlines Co. (LUV) are higher by 0.54% to $39.33 in pre-market trading on Tuesday, after the company announced it expects to boost its capacity by 6% in 2015, the company's CFO said during an investor-day briefing on Monday, Reuters reports.

Close to half of the growth in capacity will come from the Dallas Love Field airport. Flying at this airport had been partially restricted, until October 2014, when the 1979 "Wright Amendment," statute expired, Reuters added.

Under then House Speaker Jim Wright, the statute was intended to restrict the traffic out of Love Field and direct growth toward the struggling Dallas-Forth Worth International Airport, the Los Angeles Times reported. 

The company said that it is also expecting its passenger revenue per available seat mile to increase by 1% to 2% for the current quarter.

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 weak operating cash flow."

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

  • SOUTHWEST AIRLINES has improved earnings per share by 29.7% 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 ($1.94 versus $1.06).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Airlines industry average. The net income increased by 27.0% when compared to the same quarter one year prior, rising from $259.00 million to $329.00 million.
  • LUV's revenue growth trails the industry average of 32.5%. Since the same quarter one year prior, revenues slightly increased by 5.6%. 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 0.62, 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

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

More from Markets

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Jim Cramer: The 10-Year Yield Could Go to 2.75%

Jim Cramer: The 10-Year Yield Could Go to 2.75%

Oil Slumps, Gas Spikes Ahead of Holiday Weekend; Assessing the Chipmakers--ICYMI

Oil Slumps, Gas Spikes Ahead of Holiday Weekend; Assessing the Chipmakers--ICYMI

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%