Southwest Airlines Co. (LUV) saw its shares plummet 5.16% during intraday trading on Thursday. The sharp decline followed the release of the company's first-quarter financial results and commentary from management that cast significant doubt on its ability to meet full-year profit targets.
The airline reported adjusted earnings of 45 cents per share for the quarter, slightly missing the analyst consensus estimate of 47 cents. Revenue of $7.25 billion also came in just below expectations. More critically, the company declined to provide an update to its full-year adjusted EPS guidance of $4.00, stating that doing so "would not be productive at this time" given macroeconomic uncertainty.
Chief Executive Bob Jordan highlighted that achieving the annual profit goal would now require either lower fuel prices or stronger revenue performance. This outlook is under severe pressure from a dramatic spike in jet fuel costs, which the CEO characterized as a "billion dollar headwind" for the second quarter. Fuel prices are expected to surge to between $4.10 and $4.15 per gallon in Q2, up from $2.73 in the first quarter, driven largely by geopolitical tensions and the war involving Iran. This industry-wide cost shock has led several major U.S. carriers to cut or withdraw their financial forecasts, contributing to the negative sentiment surrounding Southwest's stock.
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