Southwest Airlines (LUV), the largest discount carrier in the U.S., has reported a 46% year-over-year decline in its second-quarter profit, sending its stock tumbling.
However, despite the sharp decline, Dallas, Texas-based Southwest still managed to beat Wall Street forecasts for its Q2 print.
The company announced earnings per share (EPS) of $0.58 U.S. versus $0.51 U.S. that was the consensus expectation of analysts.
Revenue in the quarter totaled $7.35 billion U.S., which came in ahead of forecasts that called for $7.32 billion U.S. Sales were up 4.5% from a year earlier.
However, revenue per available seat mile, a gauge of airline pricing power, fell 3.8%. That was inline with the carrier’s own forecast.
Shares of Southwest Airlines dropped 5% on news of its latest financial results.
In terms of guidance, Southwest forecast a potential drop in unit revenue for the current third quarter as an oversupplied U.S. market forces it to discount tickets during the summer months.
The company said that its unit revenue for Q3 of this year could decline as much as 2% year-over-year and non-fuel costs could rise as much as 13%.
The latest financial results come as Southwest Airlines faces pressure from a prominent activist investor.
In June, activist Elliott Investment Management disclosed a $2 billion U.S. stake in Southwest Airlines and has called for a leadership change at the carrier.
Along with its Q2 results, Southwest Airlines announced that it is doing away with its open seating plan and will increase the legroom on many of its flights. It also plans to add overnight flights to its schedule moving forward.
Prior to today (July 25), the stock of Southwest Airlines had declined 25% over the last 12 months and was trading at $26.61 U.S. per share.
