How Will Southwest Airlines Stock React To Its Upcoming Earnings?
Southwest Airlines (NYSE:LUV) is scheduled to release its earnings report on Thursday, April 24, 2025. Currently, the company holds a market capitalization of $15 billion. Over the past twelve months, Southwest generated $27 billion in revenue, achieving operational profitability with $321 million in operating profits and a net income of $465 million.
Looking ahead, consensus estimates anticipate a loss of $0.19 per share on $6.4 billion in sales for the upcoming report. This compares to a loss of $0.36 per share on $6.33 billion in sales during the same period last year.
For event-driven traders, understanding historical post-earnings stock reactions can be valuable, regardless of how the upcoming results and outlook influence the stock price. This analysis offers two potential strategies:
- Pre-Earnings Positioning: By examining historical data, traders can assess the probabilities of different post-earnings scenarios and strategically position themselves before the announcement.
- Post-Earnings Trading: Alternatively, traders can analyze the correlation between immediate and medium-term returns following past earnings releases. This approach involves initiating a trade one day after the earnings announcement.
Over the last five years, Southwest has exhibited a negative one-day return following earnings in 70% of cases. The median negative return during these instances was -2.7%, with the largest single-day negative return reaching -8.9%.
Image by F. Muhammad from Pixabay
See earnings reaction history of all stocks
Southwest Airlines’ Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post-earnings returns:
- There are 20 earnings data points recorded over the last five years, with 6 positive and 14 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 30% of the time.
- However, this percentage decreases to 25% if we consider data for the last 3 years instead of 5.
- Median of the 6 positive returns = 2.4%, and median of the 14 negative returns = -2.7%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
LUV 1D, 5D, and 21D post earnings return
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
LUV Correlation Between 1D, 5D and 21D Historical Returns
Is There Any Correlation With Peer Earnings?
Sometimes, peer performance can have influence on post-earnings stock reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on the past post-earnings performance of Southwest Airlines stock compared with the stock performance of peers that reported earnings just before Southwest Airlines. For fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.
LUV Correlation With Peer Earnings
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