LUV - Embedded Expectations Analysis - 2021 03 03
Southwest Airlines Co. (LUV:USA) currently trades at a premium relative to UAFRS-based (Uniform) assets, with a 1.4x Uniform P/B. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about the pace of leisure and business travel recovery, fare and passenger revenue declines, and sustaining their best-in-class customer serviceSpecifically, management may lack confidence in their ability to mitigate declines in average fares and passenger revenue, maintain best-in-class customer service, and keep an industry-low rate of baggage mishandling. Moreover, they may have concerns about the pace of the recovery in leisure travel demand following the holiday season and particularly in Hawaii and other nature-inspired destinations. Furthermore, management may lack confidence in their ability to increase service in Hawaii following Boeing MAX aircraft deliveries, create a more efficient and cost-effective flight network, and execute their capex plans. They may also be concerned about the retirement of their airplanes, adding more MAX 8's to their fleet, and potential delays in their new location openings
Southwest Airlines operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. The company has Boeing 737 aircraft in its fleet and serves destinations in various states, the District of Columbia, the Commonwealth of Puerto Rico, and other near-international countries such as Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. The company principally provides point-to-point service, which allows for direct nonstop routing. The company also provides a suite of digital platforms to support Customers' needs prior to and during the course of their travel.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.