US budget airline Southwest Airlines Co. (NYSE:LUV) will be revealing their first quarter 2012 earnings before the markets open on April 19th 2012.  Southwest has had a tough year due to rocketing fuel costs and has watched its ESP tumble by a shocking 266% from first quarter 2012 – to a predicted $0.05 this quarter.

Despite surprise earnings of 5.6% over the past three fiscal quarters and good potential for growth, Southwest will face stiff challenges to its profitability in the coming year, but has so far managed to offset rising fuel prices  with fuel price hedging and an increased domestic flight schedule.

Earnings came in at  $98 million in the first quarter, due to one-time gains on fuel-hedging contracts, or EPS of $0.13.

Excluding the contract gains, the airline lost $18 million, however, this was less than analysts forecasts.

Excluding the contracts EPS was 0.2 versus analyst estimates of -$0.5 EPS.

Traffic grew 23% from prior year and capacity rose 25%. The percentage of available seats filled, was down 100 basis points to 77.3%.

Below is more our of pre-earnings analysis:


Over the past month, the magnitude of fiscal 2012 estimate revisions fell from $0.71 to $0.68, proving that the markets are not entirely confident in Southwest’s ability to weather the storms ahead.  Zacks Consensus Estimate gives an ESP for this quarter of $0.05.  The average opinion among analysts is more pessimistic at $0.03.  The whisper number is a barely more optimistic $0.04.

Analyst Ratings

The overall analyst consensus is tentative advice to buy.  Of fourteen analysts, six recommend buy or strong buy, the remaining eight recommending hold.  No analysts advise sell at this stage.

Competitive firms

In an era where air carriers are facing the dual challenge of rising demand for affordable flights and steeply increasing fuel costs, Southwest is faced by several serious competitors.  These include United Continental Holdings (NYSE:UAL) and Delta Air Lines Inc (NYSE:DAL) and Boeing Co (NYSE:BA)

Recent Price Movements

In the last five days Southwest’s stock price has fallen from $8.14 to $7.88 at the close of play on Wednesday 18th April, down from $8.04 in the last day of trading.