Southwest fell about 3 percent today, its first big move after a quiet week, and now sits 4 percent below its July high. We think this is mostly about oil prices rising today, which adds to the fuel cost worries that have weighed on the stock since its last earnings report.
Our view
Southwest is successfully proving it can sell premium seats and assigned boarding without losing its loyal fans. While higher fuel costs will pinch profits for a while, the airline's fundamental earning power is growing, so owners should sit tight.
Oil prices rise on Middle East shipping restrictions
Crude oil prices rose on Thursday after Iran published a draft plan that would place new restrictions on ships moving through the Strait of Hormuz. This narrow waterway is a critical path for global oil supplies. For an airline like Southwest, higher oil prices quickly turn into higher jet fuel costs, which is the company's largest expense after labor.
This development comes at a difficult time for the industry. Recent data shows that U.S. airlines already spent over 6 billion dollars on fuel in May, nearly double what they paid a year ago. If these shipping restrictions lead to a lasting jump in oil prices, it will likely eat into the profit gains Southwest is trying to make from its new premium seating strategy.
Southwest is rolling out new benefits specifically for corporate travelers, including a product called Business Priority that offers extra assistance on the day of travel. It is also upgrading its booking technology to make it easier for large companies to manage their travel through standard industry software.
This is a key part of the company's plan to move beyond being just a low-cost vacation airline. Business travelers usually pay higher fares and book more often, but they expect specific perks and easy booking tools. If Southwest can win over more of these high-paying customers, it will help support the higher profit margins management has promised.
Southwest is running a new promotion where Rapid Rewards members can earn a temporary Companion Pass by booking just one qualifying round-trip flight. This pass allows a traveler to bring a friend or family member for free on any flight they take between January and March of next year. These promotions are a standard tool for Southwest to keep its planes full during the slower winter months. While it gives away some seats for free, it helps build loyalty and encourages travelers to book more flights during the busy end-of-year season to qualify for the deal.
Southwest's board of directors declared a cash dividend of 18 cents per share. This payment will go to shareholders who own the stock as of September 3 and will be paid out on September 24. This is a routine move for the company, which has a long history of returning cash to its owners through these regular quarterly payments.
The Federal Aviation Administration announced that U.S. airlines will be eligible for up to 2.2 billion dollars in government rebates to help cover the cost of retrofitting aircraft. These upgrades are required by 2030 to prevent potential interference from new wireless signals. While the work is mandatory, the government funding helps offset the bill. For Southwest, which operates a huge fleet of over 800 planes, this assistance makes a necessary safety upgrade less of a financial burden.
Analysts have recently kept their ratings steady while showing mixed reactions to the company's latest price targets. Nineteen of 45 analysts rate the stock a buy, and the average target of $54 suggests a 16% upside from today's price.
Average target$54.46+16%vs $46.94 today
TodayAvg price
Low $36.10High $65
Hold45 analysts
5Bearish
21Neutral
19Bullish
FirmRatingPrice TargetDate
Jefferies
Hold
$50→$46
7/26/2026
BMO Capital
Outperform
$58.50→$60
7/24/2026
Morgan Stanley
Overweight
$60→$65
7/6/2026
Raymond James
Outperform
$55→$60
7/6/2026
Cantor Fitzgerald
—
$47→$53
7/2/2026
Barclays
Overweight
$56→$65
6/25/2026
UBS
Buy
$53→$61
6/23/2026
Jefferies
Hold
$44
6/16/2026
Morgan Stanley
Overweight
$55→$60
6/1/2026
UBS
Buy
$49→$53
5/26/2026
Jefferies
Hold
$42→$37
4/27/2026
Evercore ISI
In Line
$43→$44
4/24/2026
Southwest Airlines earnings
Southwest has a habit of clearing the bars set for it, beating profit expectations in six of the last eight quarters even as it navigates a massive business model shift.
Earnings history
EstimateBeatMiss
Southwest Airlines past earnings results
Expected
Actual
Surprise
EPS
$0.51
$0.94
+84.3%
Revenue
$8.58B
$8.43B
-1.8%
Key highlights
Profit outlook lowered: The company reduced its full year earnings guidance to a range of $3.25 to $4.25 per share, down from its previous floor of $4.00, as it works through higher costs. This new range is critical for long term owners because it shows that while the business is growing, expensive fuel is currently eating into the benefits of higher ticket prices.
Business travel record: Revenue from managed business travel reached an all time record and grew 30% compared to last year. This is a major shift for the airline because business travelers often book higher priced seats at the last minute, which helped push total operating revenue up 16.4% to $8.4 billion this quarter.
Fuel cost pressure: Spending on aircraft fuel jumped by $889 million compared to the same period last year, reaching a cost of $3.92 per gallon. Even though this was a massive jump in expenses, the company still managed to grow its adjusted operating margin to 6.7%, up from 3.4% a year ago, by being more efficient in other parts of the business.
Loyalty program expansion: The Rapid Rewards loyalty program grew to nearly 100 million members after new enrollments increased 35% over the past year. This matters for the long term because these members are more likely to use the company's credit card, where new signups grew 28%, providing a steady stream of high profit revenue that does not depend on how many planes are flying.
Fleet growth on track: The company expects to receive 64 new Boeing 737-8 aircraft this year, with 13 delivered during this quarter alone. Maintaining this pace is vital because it allows the airline to retire 60 older, less efficient planes and move toward a more modern fleet that uses less fuel per passenger.
Our take: A strong quarter that shows the airline is finally turning its new business strategy into real profit. While higher fuel costs are a drag, the 30% jump in business travel and record loyalty signups prove the company is successfully reaching higher paying customers. This performance strengthens the case that the business is becoming more resilient.
Southwest Airlines’s next earnings date
Q3 2026
OCT
21
Expectation
EPS
$0.67
Revenue
$8.20B
SEP
3
Dividend payday
Own the stock before this date to get the next dividend payment.
Metrics we are tracking
Metric
Expectations
Status
Premium Buy-Up Rate
Percentage of customers upgrading fares staying above 55%
60% in Q1 2026
RASM Growth
Unit revenue per seat mile growing 5% above industry average
