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Southwest Airlines Co. (NYSE:LUV) dipped in early trading on Tuesday after Evercore ISI pulled its bullish view on the airline stock. The firm moved to an In-line rating on the carrier after having it slotted at Outperform.
“We’re moving to the sidelines as the near-term risk reward is balanced, in our view. 2023 was a transition year for the company as it recovered from operational challenges in December of 2022 and worked to get new labor contracts in place,” updated Duane Pfennigwerth.
While Evercore ISI does not agree with the bear case that was repeatedly heard over the balance of last year that Southwest Airlines (LUV) is uniquely structurally challenged post-COVID, challenges are still seen. Of note, LUV’s current growth rate was highlighted to feel out of sync with the current pace of U.S. economic growth. Evercore ISI has estimates on LUV below the Street marks for 2024 and has a more cautious margin outlook as well. The firm plan to revisit the LUV story when greater relative margin progress is evident.
Shares of Southwest Airlines (LUV) fell 1.25% in morning trading on Tuesday to $28.52 vs. the 52-week trading range of $21.91 to $39.53. Southwest Airlines (LUV) is expected to report earnings during the later part of January. Q4 consensus estimates are for revenue of $6.72B and EPS of $0.13 to be reported.
