Southwest (LUV) PT Lowered to $65 at Jefferies on Working Capital Headwinds
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Jefferies analyst Sheila Kahyaoglu lowered the price target on Southwest (NYSE: LUV) to $65.00 (from $75.00) due to lower 2023E FCF due to working capital headwinds in 2022 and 2023.
The analyst reiterated a Buy rating, stating "Although LUV will emerge from the pandemic as a leaner airline w/ newer aircraft, cost headwinds tied to premium pay, ramp-up costs, and lower cost savings tied to labor leak into 2022. Our estimates factor in CASM-ex in line with 2019 on 1% higher ASMs. This drives our 2022E EPS down to $3.25 from $3.60. Nonetheless, 2023 headcount could be 3% below 2019 levels on 4% higher ASMs, which provides a $500MM ($0.80/sh) benefit. Our 2023E CASM-ex is 1% below 2019 levels, driving EPS of $4.75 vs. $4.27 in 2019."
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