Southwest Airlines Hits 52-Week High Anew - Analyst Blog

Shares of Southwest Airlines Co. LUV reached a fresh 52-week high of $27.22 yesterday, before closing the trading session a little lower at $27.20, reflecting a solid return of more than 95% in the past 12 months. Moreover, the company's expected long-term earnings growth rate of 30.8% also makes the stock look attractive.

Several strategies have been adopted by the company to boost revenues and reduce expenses over the next three years. These include fleet restructuring, introduction of international services and capacity management. We also believe the integration of AirTran will augment Southwest Airlines' operational and financial performance. In addition, new slots won and expansion of operations from the Reagan and LaGuardia airports will further boost its network presence.

Recently, the company enhanced its shareholders' wealth by approving a $1 billion share buyback program along with a 50% hike in its quarterly dividend to 6 cents per share from the prior-paid 4 cents. Meanwhile, this is the 151st consecutive dividend payout for Southwest Airlines, which translates into an annualized dividend of 24 cents.

So far this year, the stock has moved up by more than 44%, driven by robust financial numbers. The company has delivered positive earnings surprises in three of the last four quarters, with an average earnings beat of 8.5%, including positive surprise of 12.5% in the last concluded quarter.

Southwest Airlines had reported impressive quarterly numbers for the first quarter of 2014. The company reported earnings of 18 cents per share, beating the Zacks Consensus Estimate of 16 cents. The bottom line also exceeded the prior-year quarter's earnings of 7 cents. Quarterly revenues moved up 2.0% year over year to $4,166 million, in line with the Zacks Consensus Estimate. The market reacted positively to the earnings results leading to the company's shares jumping more than 12% to date.

Southwest Airlines currently has a Zacks Rank #1 (Strong Buy). Some other airline stocks which warrant a look are Delta Air Lines Inc. DAL, Alaska Air Group, Inc. ALK and American Airlines Group Inc. AAL. All these stocks sport a similar Zacks Rank #1.