Southwest Airlines is set to publish its earnings report on Thursday, April 24, 2025. The company currently has a market capitalization of $15 billion. Over the last twelve months, Southwest recorded $27 billion in revenue, delivered $321 million in operating profit, and posted a net income of $465 million.
Looking ahead, consensus forecasts call for a loss of $0.19 per share on $6.4 billion in sales for the next report. This is compared with a loss of $0.36 per share on $6.33 billion in sales in the same period a year ago.
For event-driven traders, grasping historical post-earnings stock movements can be valuable, irrespective of how the upcoming results and outlook affect the share price. This analysis presents two potential strategies:
- Pre-Earnings Positioning: By analyzing historical data, traders can evaluate the likelihood of various post-earnings outcomes and position themselves strategically ahead of the announcement.
- Post-Earnings Trading: Alternatively, traders can examine the correlation between short-term and medium-term returns after past earnings releases. This method entails entering a trade one day following the earnings announcement.
Over the past five years, Southwest has posted a negative one-day return after earnings in 70% of cases. The median decline in these instances was –2.7%, while the largest single-day drop reached –8.9%.
View earnings reaction history of all stocks
Historical Odds of Positive Post-Earnings Returns for Southwest Airlines
Key observations on one-day (1D) post-earnings returns:
- Over the last five years, there are 20 earnings instances recorded, with 6 positive and 14 negative one-day (1D) returns. In total, positive 1D returns occurred about 30% of the time.
- However, when focusing on the most recent three years instead of five, this percentage falls to 25%.
- The median of the 6 positive returns is 2.4%, and the median of the 14 negative returns is –2.7%.
Additional statistics for observed 5-day (5D) and 21-day (21D) post-earnings returns are summarized in the table below.
Correlation of 1D, 5D, and 21D Post-Earnings Returns
An arguably less risky approach (though not effective if correlations are low) is to analyze the relationship between short-term and medium-term post-earnings returns, identify the pair with the strongest correlation, and apply the corresponding trade. For instance, if 1D and 5D returns exhibit the highest correlation, a trader might go “long” for five days following a positive 1D post-earnings return. Below is some correlation data based on both five-year and three-year (more recent) histories. Note that “1D_5D” denotes the correlation between 1D post-earnings returns and the subsequent 5D returns.
Correlation With Peer Earnings
Peer performance can sometimes influence a stock’s post-earnings reaction; pricing effects may even start before the announcement. Below is historical data comparing Southwest Airlines’ post-earnings performance with peers that reported earnings immediately before Southwest Airlines. For consistency, peer returns also reflect one-day (1D) post-earnings returns.
Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (combination of all 3, the S&P 500, S&P mid-cap, and Russell 2000), to produce strong returns for investors. Separately, if you want upside with a smoother ride than an individual stock like Ford Motor, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.