Southwest Airlines (LUV) Shares Sink as Jet Fuel Costs Surge to Four-Year Peak

Key Highlights

• TD Cowen reduced its LUV price target from $56 down to $46, keeping a Buy rating intact
• Goldman Sachs maintains the Street’s most pessimistic stance with a Sell rating and $30 target
• Jet fuel costs have skyrocketed approximately 70% following the onset of the U.S.-Israel conflict with Iran
• LUV ranked among Thursday’s weakest S&P 500 performers, sliding 1.6%
• Wall Street consensus currently stands at Hold with a $43.72 average target price

Shares of Southwest Airlines (LUV) declined 1.6% Thursday amid mounting concerns over escalating jet fuel prices and the ongoing Iran conflict, pressuring airline stocks throughout the sector.

Southwest Airlines Co., LUV

President Trump’s Wednesday address disappointed investors hoping for signals of an imminent resolution to the conflict. His remarks instead pointed toward a potentially extended confrontation, suggesting elevated fuel expenses could persist.

Jet fuel costs have experienced a dramatic 70% increase since hostilities with Iran commenced. The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot price reached $4.344 per gallon on March 20 — marking the highest point since May 2022. Prior to the war’s outbreak on Feb. 27, the price registered at $2.428 per gallon.

TD Cowen’s Tom Fitzgerald downgraded his LUV price objective from $56 to $46 Thursday, maintaining his Buy recommendation. The revised target nonetheless suggests potential upside of approximately 27.8% from Thursday’s closing price.

Fitzgerald expressed concern regarding “the resiliency of travel demand,” pointing to the probability of sustained energy price increases and weakening credit card spending patterns. His team reduced forecasts for all six major U.S. carriers, anticipating that fuel prices will remain elevated through the end of 2026.

The selloff extended beyond LUV. United Airlines tumbled 3% to $92.21, Delta retreated 1.2%, JetBlue declined 0.7%, and American Airlines dropped 2.6%. The U.S. Global JETS ETF finished down 1.4%.

TD Cowen identified American Airlines, JetBlue, and Alaska Air Group as carriers facing the greatest vulnerability to fuel price fluctuations, pointing to elevated debt levels and heightened fuel sensitivity.

Wall Street Downgrades Accelerate

Analyst sentiment on LUV remains divided. Eight analysts recommend Buy, eight suggest Hold, and four advise Sell. The consensus price target stands at $43.72.

Goldman Sachs lowered its objective to $30 from $32 while maintaining its Sell recommendation. Bank of America reduced its target to $40 with an Underperform rating. Wells Fargo adjusted downward to $44 with Equal Weight. Raymond James decreased to $45 from $55, and BMO cut to $45 from $57.50.

Among the optimists, Barclays upgraded LUV to Overweight in December with a $56 price target. Jefferies slightly increased its target to $42 while keeping a Hold rating.

Latest Quarterly Results Fall Short on Sales

LUV released its latest quarterly results on January 28. The carrier reported earnings per share of $0.58, exceeding the $0.56 consensus estimate by $0.02.

Revenue totaled $7.44 billion, marginally missing analyst expectations of $7.51 billion. The figure represents a 7.4% year-over-year increase.

Southwest has issued guidance projecting FY2026 EPS of $4.00 and Q1 2026 EPS of $0.45. The stock trades within a 52-week range of $23.82 to $55.11.

The stock’s 50-day moving average rests at $45.70, significantly above its current price of $37.61.