Why Southwest Airlines (LUV) was Upgraded to a Buy Rating

02:18 09/16/2018

September 2018 has been kind to airline stocks. Over the last few weeks, JetBlue Airways JBLU  offered improved projections for revenue per available seat mile (RASM). The airline now expects for RASM to grow between 1% and 3% for the third quarter from a 0% to 3% range. Then United Continental UAL  said it expects for Q3 RASM to fall in a range of 4% and 6%. Now Southwest Airlines LUV  is getting in on the fun. Months ago, LUV said its RASM would be flat. But just last week, it offered a much more bullish outlook. In fact, it now anticipates growth of 1% to 1.5%. Even better for LUV, Argus analyst just upgraded the stock from a Hold to a Buy with a price target of $73. The analysts argue that recent improvements in domestic air fares and the idea of stronger RASM could help. In fact, the analyst also argues that RASM will reach the top end of the company’s guidance range. In addition, Argus expects above-peer average revenue growth in the long run on the basis of Southwest's "simple fare structure and reputation for generally good customer service.” They also raised their 2018 EPS estimates from $4.50 to $4.52, and 2019 from $5.10 to $5.15 on revenue growth. In short, keep an eye on airline stocks. They could have a great rest of the year.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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