Southwest Airlines Co.

LUV
Financial Analysis · Updated May 13, 2026 · Coverage 2026-Q2
Latest Q Revenue
$7.3B
Q1 2026 · +12.8% YoY
TTM ROIC
11.7%
FY2025 · NOPAT (Op. Income × (1 - 25% tax rate)) / Invested Capital (Total Equity + Total Debt - Cash / Net Debt) · WACC ~9% · Moat spread +3pp

Financial Snapshot

ticker: LUV step: 04 generated: 2026-05-12 source: quick-research

Southwest Airlines Co. (LUV) — Financial Snapshot

Income Statement Summary

Metric FY2022 FY2023 FY2024 YoY
Revenue ~$23.8B ~$26.1B $27.5B +5.4%
Gross Margin ~20% ~20% ~18% -200bp
Operating Margin ~4% ~3% ~1% -200bp
Net Income ~$0.98B ~$0.47B ~$0.47B flat
EPS (diluted, GAAP) ~$1.60 ~$0.77 ~$0.77 flat

Note: FY2024 profitability compressed by elevated labor costs (new union contracts) and fuel. Q1 2025 EPS was -$0.13 (loss) as transformation costs weighed. FY2026 full-year guidance: ≥$4.00 adjusted EPS — a major step-change driven by bag fees + assigned seating revenue.

Cash Flow & Balance Sheet (FY2024)

Metric Value
Operating Cash Flow ~$2.5B
Free Cash Flow ~$0.8B
Cash & Investments ~$9.5B
Total Debt ~$8.0B
Net Cash Position ~$1.5B

Key Ratios (approximate)

  • P/E (2026E): ~10x on $4.00 EPS guidance | EV/EBITDA: ~8x
  • Revenue Growth (FY2024): +5.4% | Operating Margin: ~1% (recovering to target ~8–10% by 2027)
  • Q1 2026 EPS: $0.45 (vs. -$0.13 a year prior) — transformation inflecting positively

Growth Profile

Southwest's revenue has grown from $23.8B (2022, recovery year) to $27.5B (2024) but profitability has been severely compressed by the 2023–2024 labor contract renegotiations, which baked in significant wage increases across all work groups. The 2025–2026 transformation (bag fees: May 2025; assigned seats: January 2026) is designed to add $2B+ in incremental annual revenue with minimal incremental cost, restoring margins to historical levels. Q1 2026 marked the first clear inflection: $780M (+13.4%) passenger revenue growth YoY, primarily from ancillary transformation.

Forward Estimates

  • FY2026 adjusted EPS guidance: ≥$4.00 (JPMorgan target $60/share; ~15x P/E)
  • $4.3B cumulative incremental EBIT target through 2027 from transformation
  • $5.0B ancillary revenue target by 2026 (bag fees + premium seating + loyalty)
  • Boeing MAX 7 certification expected August 2026 — fleet renewal to resume

Deeper Financial Analysis

The fundamental tier adds 9 additional research dimensions for $LUV.

Revenue Breakdown
Segment revenue, geographic mix, product-line contribution margins, and cohort dynamics.
Financial Trends
Quarter-over-quarter momentum, leading indicators, and inflection point analysis.
Balance Sheet
Debt structure, liquidity runway, dilution risk, and working capital dynamics.
Capital Allocation
Buyback cadence, M&A appetite, dividend policy, and reinvestment priorities.
Returns on Capital (ROIC)
Multi-year ROIC vs. WACC, marginal returns on reinvestment, sales-to-invested-capital efficiency, and moat spread.
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