By Callum Keown
Southwest Airlines stock was flying higher Friday after catching a rare double upgrade from J.P. Morgan analysts ahead of the carrier's earnings later this month.
It isn't so much the earnings, but excitement about the airline's guidance for 2026 that is behind the analysts' abrupt change of heart.
The potential for an earnings-per-share (EPS) outlook of $5 is "attractively probable," analyst Jamie Baker said in a note Friday. That would "handily dwarf" the market consensus of $2.98, he added.
They increased their price target to a Street-high $60 from $36, implying 40% upside to Thursday's closing price. The stock pointed 3.5% higher ahead of the open.
Southwest hasn't historically provided EPS guidance, opting instead for metrics such as revenue per available seat mile. But new revenue-boosting measures, including ending its "bags fly free" policy, mean those metrics don't paint the full picture moving forward. It is expected to shift to EPS guidance, with full-year 2026 seeming like a good moment to start.
The airline's stock has climbed 31% over the past year amid a turnaround plan and a raft of new initiatives, such as an end to the carrier's open seating policy. Delta Air Lines shares are up 16% over the same period, while United Airlines stock has risen 11% and American Airlines is down 11%.
"We're not the only ones eagerly anticipating Southwest's guide. But $5 is a big number, and none of our competitors are there yet," Baker added.
The analysts said they arrived at that number by using Southwest's one-time $3.8 billion Ebit, or earnings before interest and taxes, guidance for 2026. That outlook was withdrawn but Baker noted: "In our minds, this establishes an EBIT floor of $3 billion, nicely ahead of the $1.9 billion consensus. This implies $5 in EPS."
They added that even an EPS guide of $4.50 could still boost the stock price toward their target of $60.
Write to Callum Keown at callum.keown@dowjones.com
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(END) Dow Jones Newswires
January 09, 2026 08:20 ET (13:20 GMT)
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