Southwest Airlines shares fall as weak Q3 outlook overshadows earnings beat

Southwest Airlines Co (NYSE:LUV) shares fell astir 5% successful aboriginal trading Thursday aft the hose reported stronger-than-expected second-quarter results but issued a third-quarter net outlook that fell beneath Wall Street expectations.

The institution reported adjusted net per stock of $0.94 for the 2nd quarter, up of statement estimates of $0.51.

Revenue besides topped expectations, with adjusted operating gross reaching a grounds $8.7 billion, up 20.3% twelvemonth implicit year, compared with expert estimates of $8.58 billion.

Managed concern revenues reached an all-time quarterly record, rising 30% twelvemonth implicit year. The company's Rapid Rewards loyalty programme besides reached its largest size ever astatine astir 100 cardinal members, with caller enrollments expanding 35% twelvemonth implicit twelvemonth and grounds numbers of tier qualifiers.

"Second 4th results show the net powerfulness of our business. We delivered results good up of statement expectations contempt astir $900 cardinal of further substance disbursal year-over-year," Southwest CEO Bob Jordan said successful a statement.

Despite the stronger-than-expected quarterly performance, investors focused connected Southwest's guardant outlook.

The hose guided for 3rd 4th adjusted net per stock of $0.50 to $0.75, portion lowering its full-year 2026 adjusted EPS outlook to a scope of $3.25 to $4.25 from its erstwhile anticipation of astatine slightest $4.

For the 3rd quarter, Southwest expects gross per disposable spot mile to summation betwixt 17.5% and 19.5% twelvemonth implicit year, portion capableness is expected to scope from a 1% diminution to level growth. The institution expects adjusted outgo per disposable spot mile excluding substance to summation 3.5% to 4.0% twelvemonth implicit year.

Southwest attributed the updated forecast to higher substance costs and broader uncertainty. Fuel expenses accrued by $889 cardinal twelvemonth implicit twelvemonth successful the 2nd quarter, creating a $1.17 per stock headwind to adjusted earnings.