Southwest Airlines (NYSE:LUV) & Deutsche Lufthansa (OTCMKTS:DLAKY) Critical Analysis

Deutsche Lufthansa (OTCMKTS:DLAKY) and Southwest Airlines (NYSE:LUV) are both large-cap industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, earnings, profitability, dividends, risk and institutional ownership.

Dividends

Deutsche Lufthansa pays an annual dividend of $0.26 per share and has a dividend yield of 2.8%. Southwest Airlines pays an annual dividend of $0.72 per share and has a dividend yield of 1.6%. Deutsche Lufthansa pays out 21.8% of its earnings in the form of a dividend. Southwest Airlines pays out 34.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Deutsche Lufthansa is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Deutsche Lufthansa and Southwest Airlines’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Deutsche Lufthansa	2.72%	10.15%	2.46%
Southwest Airlines	3.34%	18.05%	4.44%

Analyst Ratings

This is a breakdown of recent ratings and target prices for Deutsche Lufthansa and Southwest Airlines, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Deutsche Lufthansa	5	1	0	1	1.57
Southwest Airlines	3	9	11	0	2.35

Southwest Airlines has a consensus price target of $48.20, suggesting a potential upside of 8.48%. Given Southwest Airlines’ stronger consensus rating and higher probable upside, analysts plainly believe Southwest Airlines is more favorable than Deutsche Lufthansa.

Volatility & Risk

Deutsche Lufthansa has a beta of 1.17, suggesting that its stock price is 17% more volatile than the S&P 500. Comparatively, Southwest Airlines has a beta of 1.23, suggesting that its stock price is 23% more volatile than the S&P 500.

Institutional and Insider Ownership

80.8% of Southwest Airlines shares are owned by institutional investors. 0.9% of Southwest Airlines shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Deutsche Lufthansa and Southwest Airlines”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Deutsche Lufthansa	$44.79 billion	0.25	$1.51 billion	$1.19	7.89
Southwest Airlines	$31.55 billion	0.69	$441.00 million	$2.08	21.36

Deutsche Lufthansa has higher revenue and earnings than Southwest Airlines. Deutsche Lufthansa is trading at a lower price-to-earnings ratio than Southwest Airlines, indicating that it is currently the more affordable of the two stocks.

Summary

Southwest Airlines beats Deutsche Lufthansa on 12 of the 17 factors compared between the two stocks.

About Deutsche Lufthansa

Deutsche Lufthansa AG operates as an aviation company worldwide. It operates in three segments: Passenger Airlines; Logistics; and Maintenance, Repair and Overhaul Services (MRO). The Passenger Airlines segment offers products and services to passengers of Lufthansa Airlines, SWISS, Austrian Airlines, Brussels Airlines, and Eurowings. Its Logistics segment offers airfreight container management, urgent shipments, and customs clearance services; and e-commerce solutions. The MRO segment provides maintenance, repair, and overhaul services for civil commercial aircraft serving original equipment manufacturers, aircraft leasing companies, operators of VIP jets, government, armed forces, and airlines. The company also offers corporate payment and billing services; vocational and professional training for cockpit and cabin crew; and IT solutions. As of December 31, 2023, it had a fleet of 721 aircraft. Deutsche Lufthansa AG was founded in 1926 and is headquartered in Cologne, Germany.

About Southwest Airlines

Southwest Airlines Co. operates as a passenger airline company that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2023, the company operated a total fleet of 817 Boeing 737 aircraft; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as ten near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. It also provides inflight entertainment and connectivity services on Wi-Fi enabled aircraft; and Rapid Rewards loyalty program that enables program members to earn points for dollars spent on Southwest base fares. In addition, the company offers a suite of digital platforms to support customers’ travel needs, including websites and apps; and SWABIZ, an online booking tool. Further, it provides ancillary services, such as Southwest’s EarlyBird Check-In, upgraded boarding, and transportation of pets and unaccompanied minors. Southwest Airlines Co. was incorporated in 1967 and is headquartered in Dallas, Texas.