When an investment opportunity presents itself, do you take action? Or are you one of the people who sit back and question things over and over again? If you are in the second group, by the time you finished going back and forth on this question, chances are you will miss the buying opportunity that Southwest Airlines has presented to investors.
In this post, I am going to walk you through why Southwest stock has dropped and why hands down this is the best airline stock for you to own. Hopefully, by the end, you will be able to take action if the stock meets your portfolio needs.
Why Southwest Tanked
Southwest Airlines (NYSE: LUV) dropped when the company reported earnings that did not impress Wall Street. Specifically, investors fear that the company will be unable to hit profit margin estimates going forward.
The result was a stock that came close to hitting its 52-week low. But was this drop an overreaction by the market?
I think it was.
The current earnings report was solid, as usually is for this airline. Revenues were up over 5%, beating estimates, and earnings per share also beat estimates, coming in at $1.08.
Also, revenue per available seat mile, a key metric in the airline industry came in weaker than expected. However, when you dig deeper into this, you will see that the main culprit of this were the hurricanes that hit the eastern coast of the United States.
This led to many flight cancellations, dragging down the companies numbers.
Overall, the company has a lot going for it. Here are the highlights:
I want to touch on this last point a little more because it is so important. Unlike with other airlines which have hubs around the country that they use as layover spots, Southwest avoids this design flaw.
