Leading U.S. carrier Southwest Airlines Co. LUV reported third-quarter 2015 financial numbers wherein both the top and the bottom line outpaced the Zacks Consensus Estimate.
Southwest Airlines reported earnings of 94 cents per share, surpassing the Zacks Consensus Estimate of 92 cents. Quarterly revenues moved up 2% year over year to $5,318million, steering past the Zacks Consensus Estimate of $5,102million. On a year-over-year basis, Passenger and Other revenues increased 3.3% and 102.1%, respectively, however, Freight revenues dropped 2.2%.
Operating Statistics
Airline traffic, measured in billions of revenue passenger miles, increased 8.9% year over year to 31.05 billion in the quarter under review. Capacity or available seat miles inched up 7.6% to 36.36 billion, while load factor (percentage of seats filled by passengers) was 85.4% compared with 84.4% in the year-ago quarter. Meanwhile, passenger revenue per available seat mile (PRASM) fell 4% year over year to 12.97 cents.
Operating Expenses & Income
In the third quarter of 2015, adjusted operating income came in at $1,225 million, up a substantial 99.5% year over year mainly buoyed by the decline in fuel costs. Total adjusted operating expenses dropped 2.2% year over year to $4,093 million. Fuel price (economic) stood at $2.2 per gallon, down from $2.94 a year ago. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and special items, decreased 0.7% year over year to 8.28 cents.
Liquidity
At the end of the third quarter of 2015, Southwest Airlines had $3,096 million in cash and short-term investments compared with $2,988 million at the end of 2014. In the reported quarter, the company had long-term debt (including current portion) of $2,381 million compared with $2,434 million at the end of 2014.
Southwest Airlines generated operating cash flow of $836 million in the reported quarter compared with $240 million in the same quarter last year. At the end of third-quarter 2015, free cash flow totaled $606 million compared with cash consumption of $166 million in the year-ago quarter.
Zacks Rank & Other Key Picks
Southwest Airlines currently carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the industry include American Airlines Group AAL, Delta Air Lines Inc. DAL and Alaska Air Group, Inc. ALK. All three stocks carry a Zacks Rank #2.
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