Southwest Airlines (LUV) Down In Early Morning 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.

Trade-Ideas LLC identified Southwest Airlines ( LUV) as a pre-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 $407.4 million.
  • LUV traded 52,040 shares today in the pre-market hours as of 9:26 AM.
  • LUV is down 2.1% today from yesterday'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 and near-international markets. As of December 31, 2014, it operated 665 Boeing 737 aircraft; and had 12 Boeing 717 aircraft. The stock currently has a dividend yield of 0.9%. LUV has a PE ratio of 16. Currently there are 9 analysts that rate Southwest Airlines a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Southwest Airlines has been 8.6 million shares per day over the past 30 days. Southwest Airlines has a market cap of $22.8 billion and is part of the services sector and transportation industry. The stock has a beta of 0.86 and a short float of 2.3% with 1.12 days to cover. Shares are down 19.2% year-to-date as of the close of trading on Tuesday.

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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 revenue growth, impressive record of earnings per share growth, solid stock price performance, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • LUV's revenue growth has slightly outpaced the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 6.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 $1.65 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($3.37 versus $1.65).
  • Powered by its strong earnings growth of 200.00% and other important driving factors, this stock has surged by 28.80% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Net operating cash flow has increased to $1,452.00 million or 29.75% when compared to the same quarter last year. Despite an increase in cash flow, SOUTHWEST AIRLINES's cash flow growth rate is still lower than the industry average growth rate of 74.79%.
  • The current debt-to-equity ratio, 0.39, 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 0.57, displays a potential problem in covering short-term cash needs.

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