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Southwest Airlines (LUV) releases strong quarterly report

Southwest Airlines (LUV) released a strong financial and operating report for 3Q15 yesterday. Revenue rose 11% y-o-y to USD 5.32 bn, outpacing expectations by 4%, while adjusted EPS soared 71% y-o-y to 94 cents, outpacing consensus by 2%. Operating margin climbed 6.2 pps to 19.7%. Such strong increase in operating margin was driven by strong drop in air fuel prices throughout the year. Traffic was up 8.9% y-o-y in Q3, load factor climbed 1 pp to 85.4%. The company's shares rose 7% yesterday following release of the report. We believe that shares of Southwest still provide attractive mid-term investment opportunity and reiterate a Buy recommendation.