Comparing Southwest Airlines (LUV) and Its Competitors

Southwest Airlines (NYSE: LUV) is one of 24 publicly-traded companies in the “Air transportation, scheduled” industry, but how does it compare to its peers? We will compare Southwest Airlines to similar companies based on the strength of its earnings, dividends, risk, valuation, profitability, analyst recommendations and institutional ownership.

Dividends

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Southwest Airlines pays an annual dividend of $0.50 per share and has a dividend yield of 0.9%. Southwest Airlines pays out 14.3% of its earnings in the form of a dividend. As a group, “Air transportation, scheduled” companies pay a dividend yield of 1.6% and pay out 20.5% of their earnings in the form of a dividend. Southwest Airlines has raised its dividend for 6 consecutive years.

Risk & Volatility

Southwest Airlines has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, Southwest Airlines’ peers have a beta of 1.16, meaning that their average share price is 16% more volatile than the S&P 500.

Valuation and Earnings

This table compares Southwest Airlines and its peers gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Net Income Price/Earnings Ratio
Southwest Airlines $21.17 billion $3.49 billion 15.80
Southwest Airlines Competitors $15.00 billion $1.00 billion 9.73

Southwest Airlines has higher revenue and earnings than its peers. Southwest Airlines is trading at a higher price-to-earnings ratio than its peers, indicating that it is currently more expensive than other companies in its industry.

Insider & Institutional Ownership

80.1% of Southwest Airlines shares are owned by institutional investors. Comparatively, 79.5% of shares of all “Air transportation, scheduled” companies are owned by institutional investors. 0.2% of Southwest Airlines shares are owned by company insiders. Comparatively, 3.8% of shares of all “Air transportation, scheduled” companies are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Southwest Airlines and its peers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Southwest Airlines 16.48% 23.43% 8.68%
Southwest Airlines Competitors 8.45% 24.20% 5.97%

Analyst Recommendations

This is a breakdown of current ratings and price targets for Southwest Airlines and its peers, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Southwest Airlines 0 4 14 0 2.78
Southwest Airlines Competitors 313 1126 1711 143 2.51

Southwest Airlines presently has a consensus target price of $71.24, indicating a potential upside of 28.84%. As a group, “Air transportation, scheduled” companies have a potential upside of 9.86%. Given Southwest Airlines’ stronger consensus rating and higher possible upside, research analysts clearly believe Southwest Airlines is more favorable than its peers.

Summary

Southwest Airlines beats its peers on 10 of the 15 factors compared.

Southwest Airlines Company Profile

Southwest Airlines Co. operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2017, the company operated a total of 706 Boeing 737 aircraft; and served 100 destinations in 40 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, Turks, and Chaos. It also sells frequent flyer points and related services to business partners participating in the Rapid Rewards frequent flyer program, such as car rental agencies, hotels, restaurants, and retailers. In addition, the company offers a suite of digital platforms to support customers needs across the travel journey, including Southwest.com, mobile.southwest.com, an iOS app, an android app, an email subscription service, and push notifications; and Swabiz.com, a Website for business customers that offer businesses shared stored company credit cards, company activity reporting, and centralized traveler management services. Southwest Airlines Co. was founded in 1967 and is based in Dallas, Texas.

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