NEW YORK (TheStreet) -- Shares of Southwest Airlines (LUV) are gaining, up 0.68% to $41.40 in pre-market trading Monday, after the airline was upgraded to "buy" from "neutral" by analysts at Goldman Sachs this morning.
The firm also raised its six month price target to $55 from $44, and cited favorable airline industry fundamentals.
Analysts at the firm said that Southwest is likely to outperform its peers, and added that they are most bullish on the domestic market where demand is set to accelerate to 3.6% year over year in 2015, while capacity continues to move upwards.
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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 ($1.95 versus $1.06).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. 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 30.4%. 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