Southwest Airlines Reports Upbeat Q3 Earnings, Strikes Deal With Elliott: Retail Turns Bullish

Shares of Southwest Airlines Co ($LUV) fell over 1% in Thursday’s pre-market session after the firm disclosed its third-quarter earnings that topped Wall Street estimates and struck a deal with activist investor Elliott Investment Management.

Southwest reported a 5% year-over-year (YoY) rise in its third-quarter (Q3) revenue of $6.87 billion compared to a Wall Street estimate of $6.79 billion. Earnings per share (EPS) came in at $0.15 versus an estimate of $0.04. However, net income fell over 65% YoY to $67 million during the quarter.

The airline forecasts unit revenue YoY growth of 3.5%-5.5% with approximately 4% drop in capacity.

“This guidance range contemplates a headwind of just under one-half point from Hurricane Milton and the resulting Customer cancellations. Thus far in the quarter, travel demand remains healthy and bookings-to-date for the holiday season are strong, demonstrating the continued resilience of the leisure travel market,” Southwest said in a statement.

Meanwhile, Southwest has struck a deal with Elliott Investment Management after months-long tussle with the activist investor. As part of the agreement, Executive Chairman Gary Kelly will accelerate his retirement, which – along with the previously announced retirements of six other Southwest Directors – will go into effect on Nov. 1, 2024. Notably, CEO Bob Jordan will continue to lead the firm.

The firm also announced David Cush, Sarah Feinberg, Dave Grissen, Gregg Saretsky and Patricia Watson as independent directors of the Board. The Board will be reduced to 13 members as of Southwest's 2025 Annual Shareholder Meeting, the firm said.

Meanwhile, the Board refreshed its Finance Committee, which is responsible for assisting in its oversight of the company's operational and strategic plans. Saretsky, Cush and three additional directors will serve on the Finance Committee, with Saretsky serving as Chair.

Elliott Partner John Pike and Portfolio Manager Bobby Xu said in prepared remarks that the strategic changes announced by Southwest will position the firm to enhance business performance, drive operational execution and evaluate additional changes to create long-term shareholder value.

Elliott also withdrew its request to call a Special Meeting of shareholders and said it no longer intends to nominate candidates to stand for election to the Southwest Airlines Board.

Following the announcements, retail sentiment on Stocktwits jumped into the ‘bullish’ territory (70/100) from ‘bearish’ a day ago.

One Stocktwits user expressed optimism on the latest developments.

Southwest Airlines shares have gained nearly 8% since the beginning of the year.

Also See: Valero Energy Stock Rises Pre-Market After Upbeat Q3 Print: Retail Ignores Big Profit Decline

For updates and corrections email newsroom@stocktwits.com