Investing.com -- Argus upgraded Southwest Airlines (NYSE:LUV) to a Buy rating in a note Tuesday, noting strong travel demand and management’s ability to execute its growth plans.
The firm set a price target of $35 per share on the stock, reflecting confidence in the airline’s ability to navigate rising costs while maximizing revenue growth.
According to Argus, Southwest plans to increase capacity by 1%-2% and fully utilize its existing fleet through 2027.
The company expects unit costs to moderate throughout the year, while improvements in fleet fuel efficiency should support earnings recovery.
"As such, we are raising our 2025 estimate to $1.70 from $1.30 per share," the firm stated.
Southwest reported fourth-quarter adjusted earnings of $0.56 per share, exceeding the consensus estimate of $0.46 and marking an increase from $0.37 a year earlier.
On a GAAP basis, the company posted earnings of $0.42 per share, compared to a loss of $0.42 in the same period last year. Argus attributed the improvement to record fourth-quarter revenue and share repurchases.
The firm emphasized Southwest’s history of outperforming peers in revenue growth, citing its low-cost fare structure and strong customer service reputation as key factors.
"We are maintaining our long-term Buy rating based on the company’s record of above-peer-average revenue growth," Argus said.
With steady travel demand and an efficient fleet strategy, Argus believes Southwest is well-positioned for continued growth.