Southwest Airlines stock gains as CFO reiterates Q3 EPS guidance despite fuel hit

Southwest Airlines Co. stock (ISIN US8361971052) is trading higher after management reiterated on September 16, 2026 that the carrier still expects to meet its third quarter earnings per share guidance even as fuel expenses surge, a message that has improved sentiment toward the shares ahead of the fall travel season.

Price recovery as fall demand beats expectations

Per real time data from a major US stock portal on September 17, 2026, Southwest Airlines stock recently changed hands at around USD 40.63 on the New York Stock Exchange, up roughly 3.8% intraday compared with the previous close and extending a rebound from levels near USD 38 earlier in the month. The same data show the company’s market capitalization at about USD 21.45 billion as of September 17, 2026, giving investors a sense of the airline’s scale within the US carriers group.

According to Yahoo Finance on September 17, 2026, the shares were quoted at USD 40.53 at 11:14 a.m. Eastern time, up 3.51% on the day, underlining investors’ positive reaction to the latest management commentary and the stronger than expected fall revenue trends.

CFO reiterates Q3 EPS guidance despite fuel headwinds

At Morgan Stanley’s Laguna Conference, Southwest Airlines Chief Financial Officer Tom Doxey outlined that revenue for the fall season is running ahead of earlier forecasts and that the company still has the ability to hit its third quarter EPS guidance even after factoring in incremental fuel costs. As GuruFocus reported on September 16, 2026, Doxey said that fall season revenue has outpaced earlier expectations, allowing Southwest to keep its third quarter earnings guidance intact despite rising fuel prices.

In parallel, a brief update from The Fly on September 16, 2026 highlighted the CFO’s remark that, even with the incremental fuel expense in the current quarter, Southwest still has the ability to achieve the EPS guide it had set for the third quarter. For investors, this reassurance matters because it anchors expectations at a time when oil prices around USD 100 per barrel are weighing on the broader airline sector.

The emphasis on maintaining guidance comes against a backdrop of significant fuel cost inflation earlier this year. According to an industry overview from Zacks Investment Research dated September 16, 2026, Southwest’s aircraft fuel expense in the second quarter of 2026 increased by USD 889 million year over year, weighing on adjusted EPS by USD 1.17 and contributing to a 67% rise in fuel and related taxes versus the prior year period.

Second quarter 2026 results show strong revenue and EPS growth

Despite the fuel headwinds, Southwest Airlines delivered robust top line and earnings growth in the second quarter of 2026. As Yahoo Finance reported on September 17, 2026, second quarter 2026 revenue reached a record USD 8.4 billion, representing an increase of 16.4% compared with the same quarter a year earlier, while adjusted earnings per share rose about 120% to USD 0.94.

This quantified comparison between revenue and EPS growth illustrates that Southwest is managing to convert stronger demand and higher fares into profit growth, even though cost inflation is significant. Zacks noted that total operating expenses in the second quarter of 2026 rose 16.1% year over year, with aircraft fuel expense jumping to USD 1.31 billion as economic fuel cost per gallon climbed to USD 4.43 from USD 2.39, highlighting the scale of the challenge the airline must offset to preserve margins.

Looking ahead, Southwest is targeting meaningfully higher profitability once the current investment and fleet cycle is absorbed. According to Seeking Alpha, management projects adjusted EPS of USD 3.25 to USD 4.25 for full year 2026, implying a substantial step up from current quarterly run rates if demand holds and fuel prices stabilize.

Strategic shifts and demand trends support the story

Beyond near term guidance, Southwest Airlines is also modifying its business model and capacity plans to balance growth with returns. GuruFocus pointed out that the carrier has trimmed its planned capacity growth for 2026 from an earlier range of 2% to 3% year over year to roughly half that pace, a move intended to protect cash flow and profitability amid elevated fuel costs and market uncertainty.

At the same time, Southwest is pushing into higher yield segments that could support margins over time. As Yahoo Finance noted on September 17, 2026, the airline plans to open its first ever airport lounges starting in late 2027, in partnership with JPMorgan Chase on a new premium co branded credit card that will offer lounge access. The article adds that Southwest has already introduced assigned and tiered seating and bag fees for most passengers, marking a clear shift from its traditional single cabin, free bag model.

Shorter term, demand trends look supportive. A summary of the CFO’s remarks on September 17, 2026 reported by Moomoo indicated that September travel demand has exceeded expectations and that there is still room to raise ticket prices. The CFO also highlighted that new products such as designated seat services and extra legroom seats are expected to generate more than USD 1.0 billion in EBIT in 2026 and around USD 1.5 billion in 2027, giving investors concrete targets for ancillary revenue and profit contributions from product changes.

Risks from fuel costs and valuation metrics

The key risk to the Southwest Airlines story remains fuel cost volatility. Zacks’ analysis of the airline industry emphasized that US carriers have largely abandoned fuel hedging, leaving them exposed to oil price spikes, and quantified how Southwest’s second quarter 2026 fuel expense increase of USD 889 million pushed economic fuel cost per gallon up to USD 4.43 from USD 2.39. If oil prices stay near USD 100 per barrel or rise further, sustaining the current EPS guidance could become more challenging.

Valuation metrics also show a mixed picture. GuruFocus calculated Southwest’s current price to sales ratio at 0.67, significantly below its three year median of 1.25, and estimated an intrinsic value of USD 44.34 per share, suggesting the stock is roughly 11.7% undervalued versus a contemporaneous price of USD 39.15. For investors, this combination of a discounted price to sales multiple and visible earnings growth is attractive, but the same analysis underlined that Southwest has recently been unprofitable and cash flow negative, which makes traditional price to earnings metrics less informative until margins stabilize.

Stock level and investor takeaway

As of September 17, 2026, Southwest Airlines stock is trading around USD 40.63 on the New York Stock Exchange, up in the mid single digit percent range on the day and supported by stronger than expected fall demand and management’s reaffirmed third quarter EPS guidance despite sharply higher fuel costs. For investors, the combination of record second quarter 2026 revenue of USD 8.4 billion, roughly 120% year over year growth in adjusted EPS to USD 0.94, and a price to sales ratio of 0.67 versus a three year median of 1.25 makes the balance between upside potential and fuel related risk the central theme for the coming quarters.

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