UPDATE: Bank of America Downgrades Southwest Airlines to Underperform as Demand Slows

Bank of America lowered its rating on Southwest Airlines LUV from Neutral to Underperform and reduced its price target from $9.50 to $8.50. Bank of America noted, "LUV's cost edge continues to narrow, and its PRASM is falling short of our 3Q-E owing to a deteriorating business mix. We cut our 2012E to $0.68 from $0.79 and our 2013E to $0.90 from $1.05. We downgrade our rating to Underperform from Neutral and lower our P.O. to $8.50 from $9.50. LUV trades at a valuation premium to the sector, yet we now expect its 2H12 EPS momentum to lag the group and benefits from merger/fleet actions to not provide much lift until 2014." Southwest Airlines closed at $9.11 on Monday.