Deutsche Bank Upgrades Southwest (LUV) to Buy; Getting its 'Mojo' Back

January 8, 2013 7:40 AM EST
Get Alerts LUV Hot Sheet
Price: $51.09 +2.04%

Rating Summary:
    19 Buy, 7 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Deutsche Bank upgraded Southwest (NYSE: LUV) from Hold to Buy with a price target of $15.00 (from $11.00).

The firm comments, "We are raising our rating on Southwest shares from Hold to Buy as we now believe the company is well-positioned to meaningfully improve its pretax ROIC. We think the company has turned the corner on its AirTran acquisition and should start to enjoy the fruits of various revenue (e.g. AirTran code sharing) and cost initiatives (e.g. growth of 737-800 inductions). Accompanying the P&L improvement, we think there will be further debt paydown and share buybacks.

For the twelve months ended 9/30/12, Southwest’s pretax ROIC was 7%. Our new earnings forecasts for 2013 and 2014 imply an ROIC of 11% and 13%, respectively, although we are assuming only a modest contraction of Southwest’s capital base."

For an analyst ratings summary and ratings history on Southwest click here. For more ratings news on Southwest click here.

Shares of Southwest closed at $10.91 yesterday.

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