How Southwest Airlines’s Exceptional Performance Affects Its Stock Price
Southwest Airlines (LUV) reported its operational performance on March 10, 2017. Due to its unit revenue guidance cut, its stock price fell 0.85% on the same day.
JetBlue Airways (JBLU) also reported its February numbers on March 10. Due to its better-than-expected unit revenue performance, JetBlue stock rose 5.1% on the day.
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Delta Air Lines (DAL) and American Airlines (AAL) also posted gains of 1.4% and 1.3%, respectively. Spirit Airlines (SAVE) and Allegiant Travel (ALGT) gained 0.95% and 0.91%, respectively. United Continental (UAL) was the only other major airline to fall that day, posting a 0.28% decline.
Year-to-date on March 10, 2017, Southwest Airlines significantly outperformed its peers. Southwest Airlines stock rose 12.1%, followed by Alaska Air Group (ALK), which gained 8.9%. However, the other airlines’ stocks fell.
JetBlue (JBLU) posted the highest decline—10.6%—during the same period, followed by Spirit Airlines’s fall of 10.1%. Year-to-date, American Airlines (AAL) has fallen 5.9%, Allegiant Travel has fallen 3.6%, Delta Air Lines has fallen 2.6%, and United Continental has fallen 0.74%. A major catalyst for Southwest Airlines was the increased investment by long-time airline bear Warren Buffett.
Because air travel is a discretionary budget item, it makes sense to compare airline industry performance to the consumer discretionary sector. This sector, tracked by the Consumer Discretionary Select Sector SPDR ETF (XLY), rose 6.7% YTD.
The broader market, tracked by the SPDR S&P 500 ETF (SPY), rose 6.3% YTD, indicating that airlines have outperformed the consumer discretionary sector and the broader market YTD.