Skip to Content
Morningstar
Get 14 Days Free

Southwest Airlines Co LUV

Morningstar Rating
Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
Is it the right time to buy or sell?
Find out with Morningstar Premium
Is it the right time to buy or sell?
Find out with Morningstar Premium

1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Southwest Has the Clearest Pathway to Recovery in U.S. Airline Coverage; Shares Somewhat Undervalued

Burkett Huey, CFA Equity Analyst

Analyst Note

| Burkett Huey, CFA |

No-moat rated Southwest airlines reported continued revenue improvement and, excluding the effects of payroll support, posted a roughly breakeven quarter as travel surges with an easing of travel restrictions. After updating our model with second quarter results, we’re decreasing our fair value estimate for the firm to $65 from $66 as a faster pace of revenue recovery was more than offset by higher corporate taxes and increased near term oil price assumptions. Shares look somewhat attractive to us at current prices and we think that Southwest is the best-positioned  U.S. airline as it is primarily exposed to the domestic leisure travel market. We believe domestic leisure travel is the most likely form of air travel to be entirely unaffected by the pandemic over the long run.

Read Full Analysis

Company Profile

Business Description

Southwest Airlines is the largest domestic carrier in the United States, as measured by the number of originating passengers boarded. Southwest operates over 700 aircraft in an all-Boeing 737 fleet. Despite expanding into longer routes and business travel, the airline still specializes in short-haul leisure flights, using a point-to-point network. Southwest operates a low-cost carrier business model.

Contact
P.O. Box 36611
Dallas, TX, 75235-1611
T +1 214 792-4000
Sector Industrials
Industry Airlines
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Distressed
Employees 54,448

Related

Our Picks
Should These 11 Travel Stocks Be on Your Radar?
These companies stand to benefit from pent-up demand--but they aren’t all undervalued today.
Susan Dziubinski
Commentary
Large-Growth Funds That Flip-Flopped in the Value Rally
Valuation-conscious growth approaches have seen their fortunes turn for the better this year.
Benjamin Slupecki
Fund Spy
Medalist Managers Buy SPACs, Airlines, and Oil in 2021's First Quarter
Top managers looked ahead to a post-pandemic economy.
Jack Shannon
Market Update
Is There Opportunity in Airlines Stocks?
U.S. airlines turn a corner as travel demand picks up.
Margaret Giles
Fund Spy
Inside a Tough Year for Primecap
One of my favorite Vanguard fund managers fell well behind in 2020.
Russel Kinnel
Investing Specialists
Our Ultimate Stock-Pickers' Top 10 Buys and Sells
Funds focus purchases in basic materials and consumer sectors.
Nupur Balain
Fund Spy
A Stock Fund Run by Standout Managers
Primecap Odyssey Growth's successful high-conviction multimanager system contributes to its Gold rating.
Alec Lucas
Stock Analyst Update
Pandemic Causes Southwest's Passenger Traffic to Dry Up
The no-moat firm was ravaged by coronavirus in the second quarter.
Burkett Huey
Commentary
The Week Ahead: Coca-Cola, Amazon, and Microsoft to Report Earnings
We're also watching for reports from United, American Airlines, and Southwest. 
Carole Hodorowicz
US Videos
Where to Find Dividends Now
Searching for yield in a pandemic-stricken landscape is tricky but worthwhile.
Alec Lucas
Advisor Insights
Dividend Cuts Build, Hitting Small Caps, but Medalist Dividend Funds Weather the Storm
A look at the U.S. market and some Morningstar Medalists whose payouts have taken a hit.
Alec Lucas
Investing Specialists
Our Ultimate Stock-Pickers' Top 10 High-Conviction Purchases
Several funds see value in industrials and financial services; Berkshire Hathaway sells airlines stock.
Nupur Balain
Stock Strategist
10 Questions That Should Be Asked at Berkshire's Annual Meeting
Berkshire is unlikely to get through the COVID-19 pandemic and subsequent recession unscathed, so questions need to be asked.
Greggory Warren
Stock Analyst Update
Difficult Quarter for Southwest as Air Traffic Grounded
We are reducing our fair value for Southwest Airlines as we incorporate a somewhat more bearish 2020 into our forecast.
Burkett Huey
Fund Spy
Funds That Buy Like Buffett, 2020
These mutual funds own the same stocks as the Oracle of Omaha.
David Kathman
Commentary
The Week Ahead: Apple, Facebook, and Boeing to Report Earnings
We are also on the lookout for reports from Southwest, Microsoft, and Exxon Mobil.
Carole Hodorowicz
Fund Spy
U.S. Stock Funds Say Goodbye Bull Market, Hello Volatility at Quarter-End
Investors grappled with record-breaking volatility in a historic quarter.
Nick Watson
Investing Specialists
Our Ultimate Stock-Pickers' Top 10 High-Conviction and New-Money Purchases
Several funds dive into financial services and undervalued healthcare stocks.
The Morningstar Ultimate Stock-Pickers Team
Fund Spy
Funds That Buy Like Buffett, 2019
Our annual look at funds with a Buffett-like taste in stocks.
David Kathman
Commentary
Are Large Passive Funds Discouraging Competition?
The data do not support a causal story.
Aron Szapiro

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.