Southwest Airlines Misses Where it Counts

Southwest Airlines (NYS: LUV) reported earnings on July 25. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 30 (Q2), Southwest Airlines met expectations on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue grew slightly. Non-GAAP earnings per share expanded. GAAP earnings per share grew.

Gross margins increased, operating margins dropped, net margins dropped.

Revenue details
Southwest Airlines reported revenue of $4.64 billion. The 10 analysts polled by S&P Capital IQ wanted to see a top line of $4.65 billion on the same basis. GAAP reported sales were the same as the prior-year quarter's.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.38. The 15 earnings estimates compiled by S&P Capital IQ averaged $0.39 per share. Non-GAAP EPS of $0.38 for Q2 were 5.6% higher than the prior-year quarter's $0.36 per share. GAAP EPS of $0.31 for Q2 were 3.3% higher than the prior-year quarter's $0.30 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 25.7%, 20 basis points better than the prior-year quarter. Operating margin was 9.9%, 30 basis points worse than the prior-year quarter. Net margin was 4.8%, 10 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $4.45 billion. On the bottom line, the average EPS estimate is $0.28.

Next year's average estimate for revenue is $17.56 billion. The average EPS estimate is $0.99.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 1,536 members out of 1,797 rating the stock outperform, and 261 members rating it underperform. Among 406 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 358 give Southwest Airlines a green thumbs-up, and 48 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Southwest Airlines is outperform, with an average price target of $15.18.

Looking for alternatives to Southwest Airlines? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

• Add Southwest Airlines to My Watchlist.