LUV US S&P 500Russell 1000 Earnings call · transcribed from the recording
Southwest Airlines (LUV) · Q3 2026 results and valuation
Share price: $46.48 · 2026-11-11
Southwest Airlines operates a passenger airline providing scheduled air transportation in the United States and near-international markets. The company serves customers across the United States and several neighboring countries using a fleet of Boeing 737 aircraft. Source: 10-K annual report (2026-02-05)
Results Q3 2026 vs Q2 2026 · previous quarter · published 21 Oct 2026 and 23 Jul 2026
Net income up 15.9% on the previous quarter. Management sounded about as positive as a typical company call, in its script and in answers to analysts.
1 · Numbers
+15.9%
Net income vs Q2 2026
Outlook given
Net income 270.0M vs 233.0M
Revenue −0.1%
Against the same quarter last year (Q3 2025) it is +400.0%, so it is not just seasonal.
Why Against the same quarter last year (+400.0%), net income rose because strong revenue execution and disciplined cost performance expanded adjusted operating margins by 4.8 points year-over-year, despite an $820 million headwind from higher fuel prices.
2 · How management spoke
Typical
More upbeat than 62% of company calls
Answers to analysts: typical, in line with the script.
Similar to last call.
3 · What stood out
Southwest Airlines achieved an adjusted operating margin of 5.4% in the third quarter despite an $820 million year-over-year headwind from higher fuel prices.
Valuation
Is Southwest Airlines undervalued?
Reverse DCF on net income from the last full fiscal year (no meaningful free cash flow: a bank, insurer or a year of negative cash flow) (2025-12-31), grown for 10 years, discounted back, plus a terminal value. “Implied growth” is the rate the current price assumes.
At 5.6% growth a year (3-year revenue growth), the model's fair value is $13.20 a share — the stock trades 252% above it. Today's price assumes 21.3% growth a year.
Current price
$46.48
close of 2026-11-11
Market implies growth of iThe yearly free-cash-flow growth, for the next 10 years, that today’s share price already assumes. If you believe the company grows faster than this, the stock is cheap under this model; slower, and it is expensive.
+21.3% for 10 yrs
Fair value / share
$13.20
Buy below
$9.90
Price vs fair value
Overvalued >200%
Price vs buy-below price
Overvalued >200%
Management expects
Growth +21.6% · from the Q3 2026 report: “Rosem increased 21.6% year-over-year, exceeding the high end of the 17.5% to 19.5% guidance range and setting an all-time record.”
A guidance figure for growth, usually one year ahead, not a 10-year free-cash-flow rate.
Read between the lines
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Guidance
LUV delivered a 5.4% adjusted operating margin and adjusted earnings per share of 66 cents above the midpoint of guidance.
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Guidance
Rosem increased 21.6% year-over-year, exceeding the high end of the 17.5% to 19.5% guidance range and setting an all-time record.
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Guidance
LUV expects fourth quarter revenue to increase 19 to 21 percent year over year.
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Figure
The Southwest Icon Lounge Network will serve as the foundation for a new premium credit card launching in 2027.
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Figure
Operating margins improved year over year in 18 of the company's 22 strategic focus markets.
Source quote
“If you look at our 22 strategic focus markets, 18 of those improved operating margin year over year.”
4 more
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Key theme
Then the flow from operating cash flow to free cash flow will largely, maybe stating the obvious, but largely depend on the quantity of aircraft that Southwest Airlines is taking offset by the proceeds that it has as it is selling…
Source quote
“And then the flow from operating cash flow to free cash flow will largely, maybe stating the obvious, but largely depend on the quantity of aircraft that we're taking offset by the proceeds that we have as we're selling assets from our fleet.”
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Key theme
LUV expects an increased level of retirements next year, with specific numbers to be provided in three months.
Source quote
“We will also have an increased level of retirements next year, but we'll give you the specific numbers in three months.”
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Key theme
LUV achieved record third-quarter passenger revenue and the highest passenger yield in its history, showing that the company's strategy is resonating with customers.
Source quote
“We generated record third-quarter passenger revenue and achieved the highest passenger yield in our history, providing further evidence that our strategy is resonating with customers.”
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Figure
Starting January 1st, the company will introduce a new platinum tier, enhanced status benefits, and more co-brand credit card engagement opportunities to provide members new ways to earn rewards.
Source quote
“Beginning January 1st, we'll introduce new ways for members to earn recognition and rewards including a new platinum tier, enhanced benefits along the path of status, and additional opportunities to engage through our co-brand credit card.”
Tone
How upbeat the language was, compared with other companiesiTone counts positive minus negative finance words, adjusted for length. Executives mostly speak positively, so the labels compare each call with every company's latest call: “typical” is the middle third, “very upbeat” the top tenth, “cautious” the bottom tenth.. Dot: Q3 2026. Ring: Q2 2026.
Script and answers carried a similar tone, so the script's message held up under questioning.
Sentences that drove the tone
“To build on Bob's comments, Rosem increased 21.6% year-over-year, exceeding the high end of our 17.5% to 19.5% guidance range and setting an all-time record.”
“Year-over-year managed business passenger revenue growth improved sequentially in every quarter of 2026, and we've seen double-digit growth in both new and reactivated travelers, reflecting strong adoption of our enhanced...”
“By concentrating our network where we can win and giving customers more choice in how they travel with us, we're attracting more customers, increasing engagement, and improving the economics of...”
Full figures
USD · SEC EDGAR XBRL (10-Q, period end 2026-09-30)
| Metric | Q3 2026period end 2026-09-30 | Q2 2026period end 2026-06-30 | Change | Q3 2025 | YoY |
|---|---|---|---|---|---|
| Revenue | 8.42B | 8.43B | −0.1% | 6.95B | +21.2% |
| Operating income | 379.0M | 285.0M | +33.0% | 35.0M | +982.9% |
| Net income | 270.0M | 233.0M | +15.9% | 54.0M | +400.0% |
| EPS | 0.55 | 0.47 | +17.0% | 0.10 | +450.0% |
| P/E today 21.7 | 20.3 | 32.1 | −11.8 | 50.7 | −30.4 |
Topics
Most discussed now
- September produced record erasm in passenger yields, reflecting strong customer demand, sustained travel activity beyond the traditional…
- The initiatives Southwest Airlines has implemented across the business are creating a more resilient earnings profile and helping us…
- Even with a significant fuel headwind, strong revenue execution and disciplined cost performance allowed us to expand adjusted operating…
- It becomes a really quick payback when you take all that into account.
- The things that you heard really all of it talking about today, but specifically a lot of what you've heard...
Faded since Q2 2026
- Fading Customer response to Southwest Airlines' enhanced product offering is showing up in strong engagement results.
- Fading I was just going to address the long term growth.
- Dropped Southwest Airlines organized its management technology teams to continually update that post the rollout January 27.
- Dropped The point is that Southwest Airlines has changed the business model of Southwest Airlines to meet customers' needs and expectations to...
Latest announcements
Official filings, newest first. Summaries are generated from each filing and its attachment; every figure is checked against the source.
- Material agreement; New financial obligation; Other events · SEC 8-K
- Results of operations · SEC 8-K
Southwest Airlines reported third-quarter 2026 operating revenues of $8.4 billion, an increase of 21.2% compared to the same period last year.
- Material agreement; Agreement terminated; New financial obligation · SEC 8-K
Southwest Airlines Co. entered into a new $2 billion five-year revolving credit facility on August 10, 2026, and terminated its previous revolving credit facility dated August 3, 2016.
- Director or officer change · SEC 8-K
Southwest Airlines Co. appointed Varun Krishna and Jason T. Liberty to its Board of Directors on August 10, 2026, with each member receiving an annual retainer fee of $100,000.
- Director or officer change · SEC 8-K
The Compensation Committee approved changes to annual base salaries and long-term incentive targets for certain officers, including Bob Jordan, effective August 15, 2026.
- Results of operations · SEC 8-K
Southwest Airlines reported record operating revenues of $8.4 billion, up 16.4% year-over-year, and adjusted operating revenues of $8.7 billion, up 20.3% year-over-year, despite an $889 million increase in fuel costs.
- Material agreement; New financial obligation · SEC 8-K
Southwest Airlines Co. entered into an agreement to increase its senior secured term loan facility by $1.0 billion, bringing the total outstanding principal amount of Term Loans to $1.5 billion.
- Shareholder vote results · SEC 8-K · routine
Balance sheet & ownership
From SEC filings; short interest is FINRA data via Yahoo. Collected 2026-10-27.
Cash & runway
Cash & equivalents
$3.62B
2026-09-30
Implied runway
—
operating cash flow positive over the TTM window
Dilution
weighted-average basic shares, per quarter. Change: -6.5% YoY, +0.0% QoQ.
| Quarter | Shares |
|---|---|
| Q1 2025 | 584.0M |
| Q2 2025 | 538.0M |
| Q3 2025 | 523.0M |
| Q1 2026 | 498.0M |
| Q2 2026 | 489.0M |
| Q3 2026 | 489.0M |
Shares outstanding: 489.6M (2026-10-21)
Insider transactions
Form 4 open-market trades (codes S/P), trailing 12 months. 36 filings parsed.
Sold by insiders
8.2K shares
$306.5K · 2 transactions
Bought by insiders
0 shares
0 transactions
Net direction
net selling
Catalyst calendar
management-stated targets — from the latest earnings call; plans, not promises.
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January 1st
introduction of new ways for members to earn recognition and rewards including a new platinum tier, enhanced benefits along the path of status, and additional opportunities to engage through our co-brand credit card
Source quote
“Beginning January 1st, we'll introduce new ways for members to earn recognition and rewards including a new platinum tier, enhanced benefits along the path of status, and additional opportunities to engage through our co-brand credit card.”
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next spring
launching of expanded point usage with international loyalty partnerships and partner redemption
Source quote
“We're expanding how members can use their points with international loyalty partnerships and partner redemption launching next spring, and the ability to redeem points for ancillary purchases, including seat selection, to follow later in 2027.”
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this time next year
completion of the fleet-wide rollout of Starlink Ultrapass Wi-Fi
Source quote
“In addition, we continue the installation of Starlink Ultrapass Wi-Fi on all of our aircraft, available free to Rapid Rewards members with the fleet-wide rollout expected to be complete by this time next year.”
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fourth quarter next year
welcoming first lounge guests
Source quote
“Lounges are already under construction in Austin, Baltimore, Honolulu, and Nashville, with at least seven additional locations planned as we expect to welcome our first lounge guests in fourth quarter next year.”
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2027
launching of a new premium credit card
Source quote
“The Southwest Icon Lounge Network will serve as the foundation for a new premium credit card launching in 2027.”