Upside case
Bull case
$810+1852.9%
LUV would need investors to value it at roughly 304x earnings — about 289x more generous than today's 16x forward P/E. That requires meaningful multiple expansion on top of continued earnings growth.
Analysis OverviewHoldUpdated May 1, 2026
Southwest Airlines Co. (LUV) Stock Analysis
Wall Street verdict, consensus price target, and analyst rating breakdown — everything needed to frame the risk/reward at today's price.
Analyst consensus
Hold
Covering
45
analysts
19 bullish · 5 bearish · 45 covering LUV
Strong Buy
0
Buy
19
Hold
21
Sell
5
Strong Sell
0
Consensus Target
$50
+20.2% vs today
Scenario Range
— – $810
Model bear to bull value window
Coverage
45
Published analyst ratings
Valuation Context
15.6x
Forward P/E · Market cap $20.4B
LUV price targets
Three scenarios for where LUV stock could go
Current
~$42
Confidence
41 / 100
Updated
May 1, 2026
Where we are now
Current · $42
Base
$143
Bull
$810
Market caseClosest to today
Base case
$143+245.7%
At 54x on FY1 earnings, the base case reflects a reasonable but not stretched valuation. It prices in continued growth without assuming an exceptional setup.
Stress case
Bear case
—
The bear case reflects a scenario where earnings shortfalls or multiple compression combine to materially reduce the stock from its current level.
Not financial advice. Model confidence reflects internal scenario assumptions, not a guarantee of returns. Past performance does not predict future results.
Southwest Airlines Co.
LUV · NYSEIndustrialsAirlines, Airports & Air ServicesDecember year-end
Southwest Airlines is a major U.S. low-cost passenger airline that operates a point-to-point route network primarily within the United States and to near-international destinations. It generates revenue primarily from passenger fares — with ancillary income from services like EarlyBird Check-In, upgraded boarding, and its Rapid Rewards loyalty program — while maintaining a simplified fleet of only Boeing 737 aircraft to reduce costs. The company's key competitive advantage is its low-cost operational model enabled by high aircraft utilization, efficient point-to-point routing, and a strong corporate culture that drives employee productivity.
Market Cap
$20.4B
Revenue TTM
$28.9B
Net Income TTM
$817M
Net Margin
2.8%
LUV Revenue and Earnings Performance
Quarterly beat-or-miss track record against analyst estimates, plus forward revenue and EPS outlook for the next two fiscal years.
EPS Beat Rate
58%Exceptional
12 quarters tracked
Revenue Beat Rate
50%Exceptional
vs consensus estimates
Avg EPS Surprise
+360.6%
above Street consensus
Beat / Miss Record
BeatMissLeft = EPS · Right = Revenue
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Last 4 Quarters
EPS beats: 3 of 4Q3 2025
EPS
$0.43/$0.51
Revenue
$7.2B/$7.3B
Q4 2025
EPS
$0.11/$-0.04
Revenue
$6.9B/$6.9B
Q1 2026
EPS
$0.58/$0.57
Revenue
$7.4B/$7.5B
Q2 2026
EPS
$0.45/$0.45
Revenue
$7.2B/$7.3B
| Quarter | EPS (Actual / Est) | EPS Surprise | Revenue (Actual / Est) | Rev Surprise |
|---|---|---|---|---|
| Q3 2025 | $0.43/$0.51 | -15.9% | $7.2B/$7.3B | -0.7% |
| Q4 2025 | $0.11/$-0.04 | +398.7% | $6.9B/$6.9B | +0.5% |
| Q1 2026 | $0.58/$0.57 | +2.1% | $7.4B/$7.5B | -0.8% |
| Q2 2026 | $0.45/$0.45 | +0.0% | $7.2B/$7.3B | -0.3% |
FY1–FY2 Estimates
Revenue Outlook
FY1
$31.8B
+10.1% YoY
FY2
$33.7B
+5.8% YoY
EPS Outlook
FY1
$2.12
+30.4% YoY
FY2
$2.73
+28.9% YoY
Trailing FCF (TTM)-$401M
FCF Margin: -1.4%
Next Earnings
—
Expected EPS
—
Expected Revenue
—
LUV beat EPS estimates in 3 of 4 tracked quarters. A strong delivery record supports forward estimate credibility.
LUV Revenue Breakdown by Segment
Product and geographic revenue mix from the latest annual disclosure, with year-over-year growth by segment.
Latest disclosure
FY 2025
Total disclosed revenue $28.1B
Product Mix
Latest annual revenue by segment or product family
Passenger
91.0%
+2.2% YoY
Tap, hover, or focus a slice to inspect segment detail.
Geographic Mix
Latest annual revenue by reported region
North America
97.3%
+2.2% YoY
Tap, hover, or focus a slice to inspect segment detail.
Passenger is the largest disclosed segment at 91.0% of FY 2025 revenue, up 2.2% YoY.
North America is the largest reported region at 97.3%, up 2.2% YoY.
LUV Valuation Snapshot
Current multiples compared to the S&P 500, the company's sector, and its own five-year average.
Relative Value Signal
Slightly Overvalued
Fair value est. $33 — implies -14.8% from today's price.
Premium to Fair Value
14.8%
above fair value
Deep DiscountFair ValueVery Expensive
vs S&P 500 Trailing P/E
LUV
52.5x
vs
S&P 500
25.2x
+108% premium
vs Industrials Trailing P/E
LUV
52.5x
vs
Industrials
25.9x
+103% premium
vs LUV 5Y Avg P/E
Today
52.5x
vs
5Y Average
40.1x
+31% premium
Forward PE
15.6x
S&P 500
19.1x
-18%
Industrials
20.8x
-25%
5Y Avg
—
—
Trailing PE
52.5x
S&P 500
25.2x
+108%
Industrials
25.9x
+103%
5Y Avg
40.1x
+31%
PEG Ratio
—
S&P 500
1.75x
—
Industrials
1.59x
—
5Y Avg
—
—
EV/EBITDA
11.6x
S&P 500
15.3x
-24%
Industrials
13.9x
-16%
5Y Avg
10.5x
+11%
Price/FCF
—
S&P 500
21.3x
—
Industrials
20.6x
—
5Y Avg
14.4x
—
Price/Sales
0.7x
S&P 500
3.1x
-77%
Industrials
1.6x
-54%
5Y Avg
1.0x
-26%
Dividend Yield
1.72%
S&P 500
1.88%
-8%
Industrials
1.24%
+39%
5Y Avg
2.01%
-14%
| Metric | LUV | S&P 500 | Industrials | 5Y Avg LUV |
|---|---|---|---|---|
| Forward PE | 15.6x | 19.1x-18% | 20.8x-25% | — |
| Trailing PE | 52.5x | 25.2x+108% | 25.9x+103% | 40.1x+31% |
| PEG Ratio | — | 1.75x | 1.59x | — |
| EV/EBITDA | 11.6x | 15.3x-24% | 13.9x-16% | 10.5x+11% |
| Price/FCF | — | 21.3x | 20.6x | 14.4x |
| Price/Sales | 0.7x | 3.1x-77% | 1.6x-54% | 1.0x-26% |
| Dividend Yield | 1.72% | 1.88% | 1.24% | 2.01% |
LUV trades above S&P 500 benchmarks on 1 of 4 measured multiples — appears modestly priced relative to the S&P 500 on most measures.
Forward P/E and PEG reflect analyst consensus estimates. Historical averages use trailing ratios where forward data is unavailable.S&P 500 and sector benchmarks both use trailing median P/E — similar readings indicate the broader index and sector are priced alike.
Open valuation toolLUV Financial Health
Verdict
Adequate
LUV returns 14.2% of market cap to shareholders annually.
Cash Engine
Revenue, margins, and cash generation
Revenue (TTM)
Trailing-twelve-month sales base
$28.9B
Revenue Growth
TTM vs prior year
+4.7%
Gross Margin
Gross profit as a share of revenue
16.5%
Operating Margin
Operating income divided by revenue
3.4%
Net Margin
Net income divided by revenue
2.8%
EPS (TTM)
Diluted earnings per share, trailing twelve months
$1.62
Free Cash Flow (TTM)
Cash generation after capex
-$401M
FCF Margin
FCF as share of revenue — the primary cash quality signal
-1.4%
Capital Quality
ROIC, leverage, and debt serviceability
ROIC
Return on invested capital — primary competitive quality signal
3.0%
ROA
Return on assets, trailing twelve months
2.8%
Cash & Equivalents
Liquid assets on the balance sheet
$3.2B
Net Debt
Total debt minus cash
$2.8B
Debt Serviceability
Net debt as a multiple of annual free cash flow
—
ROE *
Return on equity, trailing twelve months
10.7%
* Elevated by buyback-compressed equity — compare ROIC (3.0%) for an undistorted picture of capital efficiency.
Shareholder Returns
How capital is returned to owners
Total shareholder yield
14.2%
Dividend
1.7%
Buyback
12.5%
Share Repurchases
Trailing buyback outflow — dollar magnitude of capital returned
$2.5B
Dividend / Share
Annualized trailing dividend per share
$0.72
Payout Ratio
Share of earnings distributed as dividends
90.5%
Shares Outstanding
Declining as buybacks retire shares
491M
All figures from the trailing twelve months. ROIC uses invested capital (equity + net debt). ROE marked * where buyback-compressed equity base may inflate the figure.
Open full ratios pageLUV Stock Risk Factors
Key factors that could pressure the stock price, compress the multiple, or weigh on future results.
AI analysis · updated April 29, 2026
High Risk
Boeing Dependency
Southwest Airlines' reliance on Boeing for its fleet, particularly the ongoing delays in the 737 MAX 7 certification, forces the airline to keep older, less fuel-efficient aircraft in service longer than planned. Further delivery delays could significantly impact growth and operational efficiency.
High Risk
Fuel Price Volatility
Fluctuations in jet fuel prices, driven by geopolitical tensions and macroeconomic uncertainty, pose a significant threat to Southwest Airlines. The company's decision to forgo fuel hedging exposes it to spot price volatility, where higher fuel costs can quickly erode profitability.
High Risk
Labor Costs
Significant raises granted to unions have resulted in a high cost structure for Southwest Airlines. Labor constitutes a substantial portion of operating expenses, making the company vulnerable to labor disputes or job actions that could further increase costs.
Medium
Economic Uncertainty
General economic downturns can reduce consumer spending on travel, leading to decreased demand for air travel, particularly in the leisure segment where Southwest primarily operates. This could adversely affect revenue and profitability.
Medium
High Operational Costs
The airline industry generally faces high operational costs, and Southwest is not immune to these pressures. Rising salaries, wages, benefits, and increased aircraft fuel costs contribute to a challenging cost environment.
Medium
FAA Oversight
Southwest Airlines is subject to FAA regulations and oversight, including potential fines for protocol failures. This regulatory scrutiny can impose additional operational constraints and costs.
Lower
Brand Dilution
Changes to long-standing brand hallmarks like 'Bags Fly Free' and open seating could lead to customer defection. Maintaining brand loyalty is crucial in a highly competitive airline market.
Lower
Load Factor Decline
A significant decline in load factor could lead to further earnings volatility for Southwest Airlines. Maintaining high load factors is essential for profitability in the airline industry.
These are risk mechanisms, not predictions. The key question is which would force a cut to earnings estimates or a lower multiple than the market currently prices in.
Why LUV Stock Could Outperform
Structural drivers behind the upside case and why the stock could outperform over the next 12 months.
AI analysis · updated April 29, 2026
Revenue Enhancement and Modernization
Southwest has transitioned from its iconic open-seating policy to assigned seating, coupled with the introduction of bag fees and premium seat upgrades. Analysts estimate these changes could generate over $1 billion in annual incremental revenue.
Strong Financial Position
Southwest is noted for maintaining one of the industry's best balance sheets, which supports its operational strategies. This financial strength allows for continued investment in growth initiatives and resilience against market fluctuations.
Cost Control and Capacity Management
The company is focused on strong cost control with minimal capacity growth, aiming for margin expansion. This disciplined approach is expected to enhance profitability as the airline navigates the post-pandemic recovery.
Earnings Per Share Growth Potential
Management has provided aggressive guidance for EPS growth, with some analysts projecting figures significantly above current consensus. For instance, JPMorgan sees an EPS outlook of $5 for 2026, indicating strong future earnings potential.
Fleet Optimization with MAX 7 Certification
The anticipated certification of the MAX 7 is expected to optimize the network and reduce fuel burn. This fleet enhancement is projected to improve operational efficiency and contribute to overall profitability.
A real bull case compounds — each driver matters most when it strengthens margins, supports capital returns, and keeps the company above the market's minimum growth bar simultaneously.
LUV Stock Price Performance
52-week range context and price returns across multiple time horizons. Dividend contribution is shown separately in the Capital Return section.
Current Price
$41.50
52W Range Position
48%
52-Week Range
Current price plotted between the 52-week low and high.
52-Week Low
$28.98
+43.2% from the low
52-Week High
$54.89
-24.4% from the high
1 Month
+8.70%
3 Month
-23.52%
YTD
+0.5%
1 Year
+39.1%
3Y CAGR
+11.9%
5Y CAGR
-7.3%
10Y CAGR
-0.1%
Range context matters because valuation compression and earnings misses rarely hit from the same starting point. A stock already far below its high can still fall, but it is no longer carrying the same embedded optimism as one pressing a fresh peak.
LUV vs Peers
Valuation, growth, and margin comparison against the closest publicly traded peers for this company.
Peer Set
Accurate peer set
Forward PE
15.6x
vs 13.6x median
+14% above peer median
Revenue Growth
+10.1%
vs +8.4% median
+20% above peer median
Net Margin
2.8%
vs 0.4% median
+684% above peer median
| Company | Mkt Cap | Fwd PE | Rev Grw | Margin | Rating | Upside |
|---|---|---|---|---|---|---|
LUV LUV Southwest Airlines Co. | $20.4B | 15.6x | +10.1% | 2.8% | Hold | +20.2% |
DAL DAL Delta Air Lines, Inc. | $47.9B | 13.6x | +6.6% | 7.9% | Buy | +12.5% |
UAL UAL United Airlines Holdings, Inc. | $32.5B | 10.7x | +10.6% | 6.1% | Buy | +36.1% |
AAL AAL American Airlines Group Inc. | $8.5B | — | +8.4% | 0.4% | Buy | +22.9% |
ULC ULCC Frontier Group Holdings, Inc. | $1.1B | — | +8.8% | -9.6% | Hold | +39.5% |
ALG ALGT Allegiant Travel Company | $1.5B | 19.0x | +7.5% | -1.7% | Hold | +36.3% |
This peer comparison reflects companies with similar business models, product lines, or market positioning, supplemented by industry grouping when direct matches are limited.
LUV Dividend and Capital Return
LUV returns capital mainly through $2.5B/year in buybacks (12.5% buyback yield), with a modest 1.72% dividend — combining for 14.2% total shareholder yield.
Dividend At RiskFCF Unknown
Total Shareholder Yield
14.2%
Dividend + buyback return per year
Buyback Yield
12.5%
Dividend Yield
1.72%
Payout Ratio
90.5%
How LUV Splits Its Return
Div 1.72%
Buyback 12.5%
Dividend 1.72%Buybacks 12.5%
Dividend Profile
Yield, cadence, and growth quality
Dividend / Share
Trailing annualized cash dividend
$0.72
Growth Streak
Consecutive years of dividend increases
1Y
3Y Div CAGR
—
5Y Div CAGR
32.0%
Ex-Dividend Date
—
Payment Cadence
Quarterly
4 payments over the last 12 months
Buyback Engine
How much per-share support comes from repurchases
Repurchases (TTM)
Cash used for buybacks in the latest trailing period
$2.5B
Estimated Shares Retired
61M
Approx. Share Reduction
12.5%
Shares Outstanding
Current diluted share count from the screening snapshot
491M
At 12.5%/year, buybacks mechanically lift EPS even with flat earnings — each remaining share represents a slightly larger piece of the company.
| Year | Div / Share | YoY Grw | BB Yield | Total Yield |
|---|---|---|---|---|
| 2026 | $0.18 | — | — | — |
| 2025 | $0.72 | 0.0% | 11.1% | 12.8% |
| 2024 | $0.72 | -20.0% | 1.2% | 3.1% |
| 2023 | $0.90 | — | 0.0% | 2.3% |
| 2020 | $0.18 | -74.3% | 1.7% | 2.4% |
FAQ
7 questionsLUV Investor Questions
Common questions answered from live analyst data and company financials.
01Is Southwest Airlines Co. (LUV) stock a buy or sell in 2026?
Southwest Airlines Co. (LUV) is rated Hold by Wall Street analysts as of 2026. Of 45 analysts covering the stock, 19 rate it Buy or Strong Buy, 21 rate it Hold, and 5 rate it Sell or Strong Sell. The consensus 12-month price target is $50, implying +20.2% from the current price of $42.
02What is the LUV stock price target for 2026?
The Wall Street consensus price target for LUV is $50 based on 45 analyst estimates. The high-end target is $73 (+75.9% from today), and the low-end target is $32 (-22.9%). The base case model target is $143.
03Is Southwest Airlines Co. (LUV) stock overvalued in 2026?
LUV trades at 15.6x times forward earnings. The stock trades at a notable premium to the broad market, which is typical for businesses with strong free cash flow and above-average growth expectations. Based on current multiples versus the peer group, the relative model signals slightly overvalued. Whether the stock is over or undervalued ultimately depends on whether consensus earnings estimates are achievable.
04What are the main risks for Southwest Airlines Co. (LUV) stock in 2026?
The primary risks for LUV in 2026 are: (1) Boeing Dependency — Southwest Airlines' reliance on Boeing for its fleet, particularly the ongoing delays in the 737 MAX 7 certification, forces the airline to keep older, less fuel-efficient aircraft in service longer than planned. (2) Fuel Price Volatility — Fluctuations in jet fuel prices, driven by geopolitical tensions and macroeconomic uncertainty, pose a significant threat to Southwest Airlines. (3) Labor Costs — Significant raises granted to unions have resulted in a high cost structure for Southwest Airlines. Each factor has the potential to pressure earnings or compress the stock's valuation multiple.
05What is Southwest Airlines Co.'s revenue and earnings forecast?
Analyst consensus estimates LUV will report consensus revenue of $31.8B (+10.1% year-over-year) and EPS of $2.12 (+30.4% year-over-year) for the upcoming fiscal year. The following year, analysts project $33.7B in revenue.
06When does Southwest Airlines Co. (LUV) report its next earnings?
A confirmed upcoming earnings date for LUV is not yet available. Check the Earnings section above for the most recent quarterly report dates and forward estimates.
07How much free cash flow does Southwest Airlines Co. generate?
Southwest Airlines Co. (LUV) had a free cash outflow of $401M in free cash flow over the trailing twelve months — a free cash flow margin of 1.4%. LUV returns capital to shareholders through dividends (1.7% yield) and share repurchases ($2.5B TTM).