Southwest Airlines Co.: “Earnings Power of the Business on Full Display"

Research evidence excerpt

Southwest Airlines Co.: “Earnings Power of the Business on Full Display"

Idea

July 23, 2026 08:49 PM GMT

Morgan Stanley & Co. LLCMSouthwest Airlines Co. | North America Ravi Shanker

Equity Analyst

“Earnings Power of the Business Ravi.Shanker@morganstanley.comMadison J Pasterchick +1 212 761-6350

Research Associate

Madison.Pasterchick@morganstanley.com +1 212 761-3787

on Full Display" Nancy Hipp

Nancy.Hipp@morganstanley.com +1 212 761-1311

AlphaSignals Earnings Reaction

Southwest Airlines Co. (LUV.N, LUV UN)

Strengthens our thesis Meaningful upside Modest revision higher

Airlines | United States of America

Impact to our thesis Financial results versus consensus Direction of next 12-month

consensus EPS Stock Rating Overweight

Source: Company data, Morgan Stanley Research Industry View Attractive

Price target $65.00

Shr price, close (Jul 22, 2026) $47.66

LUV printed a big 2Q beat, reinstated a very strong FY guide and Mkt cap, curr (mm) $26,483

mgmt. hosted a bullish conf. call painting a confident picture on 52-Week Range $55.10-28.98

Fiscal Year Ending 12/25 12/26e 12/27e 12/28e

idiosyncratic gains. We again caution against focusing on singular

EPS ($)** 0.95 4.00 5.32 6.51

KPIs and evaluate LUV on overall earnings power, instead. EPS ($)§ 0.96 3.17 4.91 5.47

ModelWare EPS ($) 0.95 4.00 5.32 6.51

Key Takeaways Unlessframeworkotherwise noted, all metrics are based on Morgan Stanley ModelWare

** = Based on consensus methodology

LUV’s 2Q came in almost double that of cons. at the EBIT level (53% above MSe), §e == MorganConsensusStanleydataResearchis providedestimatesby Refinitiv Estimates

reinforcing the multiple levers that mgmt. had to pull in 2Q.

While LUV’s comps get harder, we believe the rate of RASM comps vs. peers