UPDATE: Morgan Stanley Downgrades Southwest Airlines on Expectation of Continued PRASM Misses

In a report published on Wednesday, Morgan Stanley analyst John D. Godyn downgraded Southwest Airlines LUV from Equal-weight to Underweight and removed the base-case price target of $13 on the company. In the report, Morgan Stanley stated, "Now, after having kept pace with much more levered airlines YTD, if the cycle continues to hold firm – as we expect it to – we believe LUV is positioned to underperform the group from here. Our view is based on the following: 1. 2013 consensus estimates are >10% too high considering an emerging pattern of PRASM underperformance that is likely to continue through YE13, 2. The company's 15% ROIC target is not only unattainable in 2013 but is also a high hurdle in 2014, in our view, 3. As an Old Guard low-cost carrier, LUV has seen many of its former competitive advantages dwindle vs. peers, a theme which injects under-appreciated downside risk into shares." Southwest Airlines closed on Tuesday at $13.35.