Southwest Airlines Could Drive Long-Term Revaluation on Fiscal 2026 Outlook, Product Upside, Morgan Stanley Says

MT Newswires Live01-31 00:41

Southwest Airlines (LUV) could drive a long-term revaluation of its stock as its FY26 earnings guidance, new product rollouts, and early upside trends push analysts to raise normalized EPS forecasts, Morgan Stanley said in a note Friday.

The company's $4 per-share earnings target for fiscal 2026 is about 25% above current consensus and likely conservative despite some execution risk, the investment firm said.

Management's early 2025 results, including positive feedback on assigned seating and stronger upsell trends, signal that the airline may exceed its revenue and margin forecasts, Morgan Stanley analysts noted.

Structural tailwinds like premium product expansion, transatlantic growth, and ULCC capacity exits could support normalized EPS growth of up to $6, Morgan Stanley said.

Operational wins included industry-leading reliability, on-time performance, and cost control, alongside major strategic shifts such as bag fees, new fare tiers, and expanded distribution, Morgan Stanley added.

Morgan Stanley maintained its overweight rating for Southwest and raised its price target to $55 from $50.

Price: 48.20, Change: -0.23, Percent Change: -0.47

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