Joseph Ray, President of Gerald L. Ray & Associates, is seeing real opportunity with Southwest Airlines Co (LUV).
Given the low fuel prices that we’re seeing, their business is excellent. The stock hit new highs just again couple of months ago, and oil prices continued to go down, but the stock went down with the rest of the market at around $39, $40 today. It’s going to earn about $4 to $4.25 this year, maybe the same in 2017.
There’s probably upside because of fuel, high/low factors, stable pricing, expanded route structure, again, real earnings growth, and we’re talking about less than 10 times earnings, returning cash to shareholders through buybacks.
I think they’ll increase the dividend — and just a real opportunity. I think transports, especially the airlines generally, haven’t really benefited the way some would have thought with the lower fuel prices. I believe earnings will prove that will be an interesting place to be.
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