Southwest Airlines lowers annual profit outlook amid fuel costs surge

Southwest Airlines

22/07/2026 21:16

    

    Overview
  
US airline's Q2 operating revenue rose 16% yr/yr but missed analyst expectations
Adjusted EPS for Q2 beat analyst expectations, driven by margin expansion despite higher fuel costs
Company updated full-year adjusted EPS guidance to $3.25-$4.25, down from at least $4.00

    

    Outlook
  
Southwest Airlines sees Q3 adjusted EPS of $0.50 to $0.75
Company expects full-year 2026 adjusted EPS of $3.25 to $4.25, below prior guidance
Southwest expects 2026 capacity growth of about 1.5%, down from prior guidance of 2%

    

    Result Drivers
  
MANAGED BUSINESS REVENUES - Co said managed business revenues reached an all-time quarterly record, up 30% yr/yr
LOYALTY PROGRAM GROWTH - Rapid Rewards enrollments rose 35% yr/yr and tier qualifiers hit a record, driving program to nearly 100 mln members
COST DISCIPLINE - Operating expenses excluding fuel and special items rose 3.6% yr/yr, below prior guidance

    

    Key Details
  

            Metric
          

            Beat/Miss
          

            Actual
          

            Consensus Estimate
          
Q2 Operating revenue
Miss
$8.40 bln
$8.58 bln (18 Analysts)
Q2 Adjusted EPS
Beat
$0.94
$0.51 (20 Analysts)
Q2 EPS
 
$0.47
 

    

    Analyst Coverage
  
The current average analyst rating on the shares is "hold" and the breakdown of recommendations is 11 "strong buy" or "buy", 11 "hold" and 4 "sell" or "strong sell"
The average consensus recommendation for the airlines peer group is "buy"
Wall Street's median 12-month price target for Southwest Airlines Co is $53.00, about 8.9% above its July 21 closing price of $48.69
The stock recently traded at 12 times the next 12-month earnings vs. a P/E of 9 three months ago

    

    Reuters Recommended Reads
  
July 21 - Alaska Air Q2 swings to loss on fuel cost spike, offsetting revenue gains
July 20 - Ryanair's Q1 profit falls 34% on higher fuel costs, lower fares
July 22 - Cathay Pacific flags stronger first-half profit on travel, cargo demand

    
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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)