Key Takeaways
- TD Cowen reduced LUV price target from $56 down to $46 but retained its Buy recommendation
- Goldman Sachs maintains the Street’s most pessimistic stance with a Sell rating and $30 target
- Jet fuel costs have skyrocketed approximately 70% following escalation of the U.S.-Israel conflict with Iran
- Southwest Airlines ranked among Thursday’s poorest performers in the S&P 500, declining 1.6%
- Wall Street consensus stands at Hold with a mean price target of $43.72
Shares of Southwest Airlines (LUV) declined 1.6% during Thursday’s trading session as escalating jet fuel costs and concerns over an extended Iran conflict pressured airline equities industry-wide.
President Trump’s Wednesday address disappointed investors hoping for signals of a swift resolution to the Middle East tensions. His remarks instead indicated the possibility of a protracted conflict, suggesting elevated fuel expenses could persist longer than anticipated.
Jet fuel prices have experienced a dramatic 70% increase since hostilities with Iran commenced. The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price reached $4.344 per gallon on March 20—marking the highest reading since May 2022. By comparison, the price stood at just $2.428 per gallon on February 27, before the conflict began.
TD Cowen’s analyst Tom Fitzgerald revised his LUV price objective downward from $56 to $46 on Thursday, while maintaining his Buy recommendation. Despite the reduction, this revised target suggests potential upside of approximately 27.8% from Thursday’s closing price.
Fitzgerald expressed his team’s doubts about “the resiliency of travel demand,” pointing to probable sustained high energy costs and weakening credit card spending trends. He downgraded financial projections for all six major U.S. carriers, emphasizing that fuel expenses appear positioned to remain elevated throughout 2026.
Southwest wasn’t the only carrier facing headwinds. United Airlines dropped 3% to $92.21, Delta declined 1.2%, JetBlue retreated 0.7%, and American Airlines fell 2.6%. The U.S. Global JETS ETF posted a 1.4% loss.
TD Cowen identified American Airlines, JetBlue, and Alaska Air Group as particularly vulnerable to fuel cost fluctuations, pointing to their elevated leverage ratios and heightened fuel sensitivity.
Wall Street Downgrades Accelerate
Analyst sentiment toward LUV remains divided. Eight analysts assign Buy ratings, eight recommend Hold, and four rate it Sell. The consensus price target averages $43.72.
Goldman Sachs lowered its price objective to $30 from $32 while maintaining its Sell rating. Bank of America decreased its target to $40 with an Underperform stance. Wells Fargo adjusted downward to $44 with Equal Weight. Raymond James reduced its target to $45 from $55, and BMO dropped to $45 from $57.50.
Among the more optimistic voices, Barclays upgraded LUV to Overweight last December with a $56 price target. Jefferies made a modest upward adjustment to $42 while keeping a Hold rating.
Recent Quarterly Performance
Southwest released its latest quarterly results on January 28. The carrier reported earnings per share of $0.58, exceeding the consensus estimate of $0.56 by $0.02.
Revenue totaled $7.44 billion, falling marginally short of the $7.51 billion analyst projection. Despite missing expectations, this represents a 7.4% increase compared to the same period last year.
Southwest has provided guidance calling for full-year 2026 EPS of $4.00 and first-quarter 2026 EPS of $0.45. The stock has traded within a 52-week range spanning from $23.82 to $55.11.
The stock’s 50-day moving average currently stands at $45.70, significantly above its present trading level of $37.61.
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