Southwest Airlines (LUV) Sell-Off is an Overreaction - Wolfe

Wolfe Research analyst Hunter Keay came out to defend Southwest Airlines (NYSE: LUV) after the company cut 1Q18 RASM guidance from the prior range of +1-2% y/y to ~flat while also improving 1Q18 CASMx guidance by 50bp and guiding to the low end of fuel ($2.10/gal).

Keay said while they didn’t expect LUV to raise 1Q18 RASM, they didn’t expect them to cut, either.

The analyst guess LUV just mis-forecast the holiday travel period, for one thing. He said these things happen but "shaving 5-6% out of the name on this update feels harsh and implies 2018 EPS estimates will decline ~$0.25/share, holding valuation constant. That seems like too much."

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