By Trefis Team
SAN DIEGO, CALIFORNIA - APRIL 20: A Southwest Airlines Boeing 737 airplane approaches San Diego International Airport for a landing from Oakland on April 20, 2025. This bustling airport serves as a critical hub for both domestic and international travel, reflecting the significant role of airlines in the economic landscape of the region. (Photo by Kevin Carter/Getty Images)

As anticipation builds, Southwest Airlines is set to unveil its earnings report on Thursday, April 24, 2025. The airline, which boasts a market capitalization of approximately $15 billion, has navigated a turbulent financial environment over the past year. In the last twelve months, Southwest recorded an impressive $27 billion in revenue, alongside an operating profit of $321 million and a net income of $465 million. However, despite these figures, analysts are cautious, with consensus forecasts predicting a loss of $0.19 per share on expected sales of $6.4 billion for the upcoming report. This marks an improvement from the previous year's loss of $0.36 per share on sales of $6.33 billion during the same period.

For event-driven traders, understanding historical stock movements following earnings announcements is crucial. Analyzing past data can provide insights into how the market might react to the forthcoming report. Over the past five years, Southwest Airlines has experienced a negative one-day return after earnings in 70% of the cases. The median decline in these instances was notable, averaging a drop of 2.7%. The airline even witnessed a significant single-day drop of 8.9% in certain circumstances.

To aid traders, key observations on one-day (1D) post-earnings returns are crucial. Additional statistics, including five-day (5D) and twenty-one day (21D) post-earnings returns, are summarized for better clarity. An arguably less risky trading strategy involves examining the correlation between short-term and medium-term post-earnings returns. For instance, if a trader identifies that the one-day and five-day returns exhibit the strongest correlation, they might consider taking a long position for five days following a positive one-day post-earnings return.

Historical data regarding correlations between one-day, five-day, and twenty-one day returns can provide valuable insights into potential trading strategies. For example, the correlation between 1D and 5D post-earnings returns is particularly telling.

Furthermore, the performance of peer airlines can significantly influence Southwest Airlines post-earnings reactions. Market dynamics suggest that pricing effects may begin even before the earnings announcement. Historical data comparing Southwest Airlines post-earnings performance with its peerswho report earnings just before itcan be insightful in predicting market reactions. This information is designed to help investors navigate the potential volatility surrounding earnings announcements.

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