Southwest Airlines stock holds Q3 EPS guidance as fuel costs rise
Published on 09/17/2026 at 13:57 | Editorial responsibility: Rafael Müller, Editor-in-Chief AD HOC NEWS
Southwest Airlines Co. stock (ISIN US8447411088) was recently quoted at USD 38.99 on the New York Stock Exchange on September 16, 2026, leaving the carrier valued near levels that analysts still see as below intrinsic value. As Finimize reported on September 16, 2026, management used a Morgan Stanley investor conference to reaffirm its third quarter earnings guidance even as fuel costs climb.
Q3 EPS guidance and demand outlook
According to TipRanks/The Fly on September 16, 2026, Southwest Airlines told investors it could still hit its third quarter 2026 earnings per share guidance despite a recent spike in jet fuel prices. Management highlighted that as the year progresses, the ultimate earnings outcome will depend heavily on how fuel trends develop, but reiterated confidence in the guidance range it previously communicated.
As Finimize reported on September 16, 2026, Southwest indicated that September 2026 demand and fall revenue are already running ahead of its own expectations, helping underpin that third quarter EPS outlook even as fuel costs increase. For investors, the combination of stronger-than-expected demand and maintained guidance is central to the current investment narrative around Southwest Airlines stock.
Premium seating and bag fees set to boost EBIT
The more structural story that investors focused on at the Morgan Stanley conference was Southwest's planned shift toward more premium offerings. As Finimize detailed on September 16, 2026, management expects assigned seating and extra-legroom seats to generate over USD 1.0 billion in earnings before interest and taxes (EBIT) in 2026, rising to about USD 1.5 billion in 2027. In addition, the airline sees potential for bag fees to contribute roughly another USD 1.0 billion to EBIT over the coming years.
At the same event, Southwests chief financial officer emphasized that demand is "very, very strong" and that the new premium seating strategy, combined with ancillary revenue from bag fees, could significantly improve profitability relative to recent years when the business relied more heavily on base fares. According to Seeking Alpha, Southwest presented these initiatives at Morgan Stanley's 14th Annual Laguna Conference on September 16, 2026, making clear that the EBIT contribution from premium seating and bag fees is expected to be incremental to its existing network economics.
Capacity adjustments in response to fuel prices
The earnings story is also being shaped by how Southwest manages capacity in a higher fuel-cost environment. As Reuters reported on September 16, 2026, Southwest had initially planned year-over-year capacity growth of roughly 2 to 3 percent for 2026, but has now scaled back its schedules in response to higher fuel prices. A related analysis from MarketBeat on September 16, 2026 noted that the airline has reduced its planned 2026 year-over-year capacity growth from approximately 2 to 3 percent by about half, aiming to balance strong demand with fuel-related margin pressure.
That capacity adjustment illustrates the key risk factor that sits opposite the bullish narrative on premium seating and ancillary revenue. While initiatives targeting billions of dollars in incremental EBIT can support earnings in 2026 and 2027, the overall profitability still depends on fuel prices staying within manageable ranges. For holders of Southwest Airlines stock, the central question is whether the combination of disciplined capacity, stronger demand and new revenue streams can offset the drag from higher fuel costs enough to deliver the reaffirmed third quarter EPS guidance.
Stock performance and valuation context
On the market side, Southwest Airlines stock has experienced pressure in recent months even as the longer term performance remains positive. As Simply Wall St via Yahoo Finance reported on September 17, 2026, the share price return over the prior 30 days was down 9.69 percent and the 90 day move down 18.39 percent. However, the latest close stood at USD 39.15 with a 1 year total shareholder return of 24.06 percent, showing that long term investors are still ahead despite recent volatility.
Valuation models also point to upside relative to the current price. According to GuruFocus on September 16, 2026, the proprietary GF Value model estimates an intrinsic value of USD 44.34 per share for Southwest Airlines, implying the stock is about 11.7 percent undervalued versus a referenced market price of USD 39.15. That gap between current trading levels around USD 39 and intrinsic value estimates in the mid USD 40s has led some analysts to characterize the stock as modestly undervalued, although the same analysis cautions that price-to-sales metrics warrant a careful interpretation.
Investor takeaway and current price level
For retail investors, the present setup around Southwest Airlines stock combines cyclical and structural elements. Cyclically, the company faces the industry-wide risk of elevated fuel prices, which has already prompted it to cut capacity growth roughly in half from an initial 2 to 3 percent plan for 2026, as reported by Reuters on September 16, 2026. Structurally, however, management expects assigned seating, extra-legroom seats and bag fees to add around USD 1.0 billion in EBIT in 2026 and about USD 2.5 billion when both premium seating and bag fee initiatives are fully ramped by 2027, according to Finimize.
As of the most recent trading data on September 16, 2026, Southwest Airlines stock was quoted at USD 38.99 on the New York Stock Exchange, with another recent close at USD 39.15 also cited in valuation and performance analyses. That price level sits below the intrinsic value estimate of USD 44.34 per share mentioned by GuruFocus on September 16, 2026, underscoring that the market has yet to fully price in the potential EBIT contribution from premium seating and bag fees as well as the maintained third quarter EPS guidance.
Southwest Airlines stock at a glance
- Company: Southwest Airlines Co.
- ISIN: US8447411088
- Ticker: LUV
- Trading venue: NYSE
- Price (as of September 16, 2026): 38.99 USD
- Market capitalization: [value] USD (as of September 16, 2026)
- Sector / Industry: Airlines / Passenger transportation
- Index membership: S&P 500
