Southwest Airlines Stock: Wall Street's Mixed Sentiment

Southwest Airlines (LUV) stock has underperformed the broader market over the past year, gaining 14.4% compared to the S&P 500's 16.6% rise. The airline's Q2 2025 earnings fell short of Street forecasts, with revenue of $7.24 billion and adjusted EPS of $0.43, missing the consensus estimate by 15.7%. Analysts expect LUV's EPS to rise 7.3% in the current fiscal year, with a consensus of a "Hold" rating based on 21 analysts covering the stock. The stock currently trades above its mean price target of $30.56, with a Street-high price target of $46 suggesting an upside potential of 48.7%.

Southwest Airlines (LUV) stock has shown relative underperformance over the past year, with a gain of 14.4% compared to the S&P 500's 16.6% rise. The airline's second-quarter 2025 earnings report fell short of Wall Street expectations, with revenue of $7.24 billion and adjusted EPS of $0.43, missing the consensus estimate by 15.7% [3].

Analysts expect LUV's EPS to rise by 7.3% in the current fiscal year, with a consensus "Hold" rating based on 21 analysts covering the stock. The stock currently trades above its mean price target of $30.56, with a Street-high price target of $46, suggesting an upside potential of 48.7% [1].

Southwest Airlines has been navigating through various challenges, including depressed travel demand and higher fuel costs. The company has implemented several changes, such as ending its open seating policy, introducing a new basic economy fare, and charging for checked bags. These adjustments have aimed to bolster its financial position and adapt to the evolving market landscape [2].

Despite these challenges, Southwest Airlines has shown resilience in its Q2 2025 earnings, reporting a net income of $213 million, or $0.39 income per diluted share, with a net income excluding special items of $230 million, or $0.43 income per diluted share [3]. The company also returned $1.6 billion to shareholders, indicating a commitment to shareholder value.

The appointment of Doug Brooks as the independent chair of the board further underscores Southwest Airlines' focus on governance and strategic oversight. Brooks, who previously served as a director since 2010, brings a wealth of experience as a former CEO of Brinker International [2].

Institutional investors have shown interest in Southwest Airlines, with several funds increasing their holdings in the stock. Empowered Funds LLC, AQR Capital Management LLC, and MIRAE ASSET GLOBAL ETFS HOLDINGS Ltd. have all increased their positions in the airline's stock, reflecting a positive outlook from the investment community [1].

The stock's current valuation and analysts' price targets suggest that Southwest Airlines has room for growth. However, investors should closely monitor the company's ability to navigate through the challenging macroeconomic environment and its ongoing transformation efforts.

References:
[1] https://www.marketbeat.com/instant-alerts/southwest-airlines-co-nyseluv-plans-018-quarterly-dividend-2025-07-31/
[2] https://money.usnews.com/investing/news/articles/2025-07-31/southwest-airlines-names-doug-brooks-as-board-chairperson
[3] https://www.ainvest.com/news/navigating-challenges-seizing-opportunities-southwest-airlines-q2-2025-earnings-call-highlights-2507/