Southwest Airlines (LUV) Shares Decline as Jet Fuel Costs Reach Highest Level in Four Years

TLDR

• TD Cowen reduced its price target for LUV from $56 to $46, while keeping a Buy rating.
• Goldman Sachs maintains a Sell rating with a $30 price target, representing the most negative outlook on Wall Street.
• Jet fuel prices have jumped approximately 70% since the start of the U.S.-Israel war with Iran.
• LUV was among the poorest-performing S&P 500 stocks on Thursday, declining 1.6%.
• The analyst consensus is a Hold, with an average price target of $43.72.

(SeaPRwire) –   Southwest Airlines (LUV) shares fell 1.6% on Thursday, pressured by increasing jet fuel prices and concerns about a prolonged war with Iran that affected the entire airline sector.

Southwest Airlines Co., LUV

President Trump’s Wednesday address disappointed Wall Street’s expectations for a swift resolution to the conflict. His remarks instead indicated the war might continue, which would sustain high fuel expenses.

Since the onset of the war with Iran, jet fuel prices have increased by about 70%. The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot price reached $4.344 per gallon on March 20, marking its highest point since May 2022. Prior to the war, on February 27, the price was $2.428 per gallon.

On Thursday, TD Cowen analyst Tom Fitzgerald lowered his price target for LUV from $56 to $46, although he reaffirmed a Buy rating. This new target still suggests a potential gain of roughly 27.8% from Thursday’s share price.

Fitzgerald expressed that his team is “skeptical of the resiliency of travel demand” due to the prospect of higher energy prices and decelerating credit card spending data. He reduced estimates for all six major U.S. airlines, noting that fuel prices are expected to remain high through the end of 2026.

The decline was not unique to LUV. United Airlines dropped 3% to $92.21, Delta Air Lines decreased 1.2%, JetBlue declined 0.7%, and American Airlines fell 2.6%. The U.S. Global JETS ETF was down 1.4%.

TD Cowen identified American Airlines, JetBlue, and Alaska Air Group as the airlines most vulnerable to fuel price risk, pointing to their higher leverage and greater sensitivity to fuel costs.

Analyst Targets Are Falling Fast

The overall analyst sentiment for LUV is divided. Eight analysts recommend Buy, eight recommend Hold, and four recommend Sell. The average price target is $43.72.

Goldman Sachs reduced its target to $30 from $32 and maintained a Sell rating. Bank of America lowered its target to $40 and kept an Underperform rating. Wells Fargo cut its target to $44 with an Equal Weight rating. Raymond James reduced its target to $45 from $55, and BMO lowered its target to $45 from $57.50.

In a more optimistic move, Barclays upgraded LUV to Overweight in December with a $56 target. Jefferies increased its target modestly to $42 and maintained a Hold rating.

Earnings Miss on Revenue

LUV’s latest quarterly earnings were reported on January 28. The airline announced EPS of $0.58, exceeding the $0.56 consensus estimate by $0.02.

Revenue was $7.44 billion, slightly missing the $7.51 billion analysts expected. This still represents a 7.4% year-over-year increase.

Southwest has provided guidance for FY2026 EPS of $4.00 and Q1 2026 EPS of $0.45. The stock’s 52-week range is between $23.82 and $55.11.

The stock’s 50-day moving average is $45.70, significantly higher than its current trading price of $37.61.