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July 25, 2019, 11:49 a.m. EDT

Southwest takes drastic action to address 737 Max issues and stock is rewarded

Earnings Watch: Alphabet and Amazon lurk on deck as antitrust interest heats up

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By Emily Bary


Bloomberg News
Southwest Airlines plans to leave Newark Liberty International Airport in November.

Air carriers have spent the past two weeks giving updates on the continued Boeing 737 Max groundings, but Southwest Airlines Co. just took the most drastic action so far.

Even if regulators allow the planes to resume service in the fall, Southwest /zigman2/quotes/201071949/lastsale LUV -1.69%  said it would be “pre-emptively” keeping them out of the flight schedule until January so that holiday travelers aren’t left in limbo. American Airlines Group Inc. /zigman2/quotes/209207041/lastsale AAL -5.89% , on the other hand, is only holding off on Max flights until Nov. 2, the company disclosed Thursday.

See more: American Airlines beats profit expectations and matches on revenue, stock drops

Investors seem to be rewarding Southwest for its conservative approach. The stock was down as much as 4.2% following its earnings report but is now trading slightly higher. American Airlines shares are still in the red.

Southwest was the most exposed major U.S. carrier to Boeing Co.’s /zigman2/quotes/208579720/lastsale BA -5.68%  troubled jets, and it’s feeling the sting of prolonged delays. The company originally targeted capacity growth of almost 5% for the year, but now it forecasts a decline of 1% to 2%. The airline is taking action to “mitigate damages,” announcing in conjunction with its Thursday morning earnings that it would be pulling out of Newark Liberty International Airport in early November.

Southwest’s pain might be its rivals’ gain, however. The company’s Newark exit looks to be a “clear positive” for United Airlines Holdings Inc. /zigman2/quotes/205037281/lastsale UAL -8.69% , according to Cowen & Co. analyst Helane Backer, as United dominates that airport already. And the Max groundings have lifted overall industry prices, an upbeat trend for less-exposed rivals, though investors have largely steered clear of Southwest’s stock.

Shares are near flat over the past six months, as the S&P 500 /zigman2/quotes/210599714/realtime SPX +2.28%  has climbed 14%.

•Merely clearing a low bar worked for 3M Co. /zigman2/quotes/205029460/lastsale MMM +3.58%  on Thursday, which saw its shares head higher even as sales and profit both dropped from a year earlier. The company also kept its full-year growth forecast intact, which suggests to RBC Capital Markets analyst Deane Dray that the company expects “an ambitious second-half ramp.”

•Bristol-Myers Squibb Co. /zigman2/quotes/202559280/lastsale BMY +1.54%  shares are on track for their biggest single-day percentage gain in more than a year following its earnings beat, though executives spent much of their time discussing recently announced mixed results of a lung-cancer trial. Wolfe Research analyst Tim Anderson deemed the results a net positive and said that investors “may not fully appreciate the value of this ‘win.’”

•Since Facebook Inc. /zigman2/quotes/205064656/lastsale FB -0.88%  on Wednesday disclosed the Federal Trade Commission investigation into its practices, it’s reasonable to assume that Amazon.com Inc. /zigman2/quotes/210331248/lastsale AMZN +0.58%  and Alphabet Inc. /zigman2/quotes/202490156/lastsale GOOGL +1.35%   /zigman2/quotes/205453964/lastsale GOOG +1.38%  will also make public disclosures about the latest chapters in their own bouts with investigators.

Big Tech is facing regulatory threat on multiple fronts, given a Justice Department inquiry into anticompetitive practices within tech as well as individual investigations into the various players. Though the inquiries might not ultimately amount to much, activity thus far is having an impact on Facebook’s business, the company admitted last night, as compliance with privacy rulings hurts its ability to execute on its existing product road map. Alphabet in particular has talked up increased spending, and it will be worth looking for commentary from Google’s parent and Amazon about how the companies plan to respond to these recent bouts of antitrust interest.

Read: OK Google, tell us why your earnings growth is slowing down ... hello? Anyone there?

•When Intel Corp. /zigman2/quotes/203649727/lastsale INTC +4.76%  tapped its former chief financial officer, Bob Swan, to take over the top role at the company, it suggested that the chip giant was looking for a more numbers-minded vision for the business. Recent reports indicating that Intel is looking to sell its smartphone-modem business to Apple Inc. /zigman2/quotes/202934861/lastsale AAPL +1.67%  hammer that point home. Such a transaction would suggest “a programmatic, rational, ROIC-based approach across all businesses,” wrote Evercore ISI’s C.J. Muse, referring to return on invested capital. Expect questions about the future of Intel’s memory business during the company’s conference call.

Intel earnings: PC sales bump may not overcome data-center weakness

•Also on deck are T-Mobile US Inc. /zigman2/quotes/204659678/lastsale TMUS -0.85% , Expedia Group Inc. /zigman2/quotes/202291990/lastsale EXPE -7.96% , Starbucks Corp. /zigman2/quotes/207508890/lastsale SBUX +3.80% , Mattel Inc. /zigman2/quotes/209819189/lastsale MAT -1.08% , and Fiserv Inc. /zigman2/quotes/204817680/lastsale FISV +0.84% . T-Mobile’s earnings will be overshadowed by questions about its pending deal for Sprint Corp. , which seems closer to gaining approval. Mattel’s report comes in the shadow of a strong showing by peer Hasbro Inc. /zigman2/quotes/201249319/lastsale HAS +0.50%  earlier in the week. Fiserv has become the biggest current short play in the payments industry following its plans to acquire First Data Corp., and short sellers have been active in the lead-up to earnings, suggesting they’re betting on a miss.

/zigman2/quotes/201071949/lastsale
US : U.S.: NYSE
$ 31.50
-0.54 -1.69%
Volume: 7.85M
April 2, 2020 6:30p
P/E Ratio
7.36
Dividend Yield
2.29%
Market Cap
$16.57 billion
Rev. per Employee
$373,554
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/zigman2/quotes/209207041/lastsale
US : U.S.: Nasdaq
$ 10.06
-0.63 -5.89%
Volume: 65.48M
April 2, 2020 4:00p
P/E Ratio
2.64
Dividend Yield
3.98%
Market Cap
$4.55 billion
Rev. per Employee
$345,547
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/zigman2/quotes/208579720/lastsale
US : U.S.: NYSE
$ 123.27
-7.43 -5.68%
Volume: 42.32M
April 2, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
6.67%
Market Cap
$73.74 billion
Rev. per Employee
$660,961
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/zigman2/quotes/205037281/lastsale
US : U.S.: Nasdaq
$ 23.42
-2.23 -8.69%
Volume: 25.18M
April 2, 2020 4:00p
P/E Ratio
2.01
Dividend Yield
N/A
Market Cap
$6.36 billion
Rev. per Employee
$448,946
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/zigman2/quotes/210599714/realtime
US : S&P US
2,526.90
+56.40 +2.28%
Volume: 3.87B
April 2, 2020 5:11p
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/zigman2/quotes/205029460/lastsale
US : U.S.: NYSE
$ 137.91
+4.77 +3.58%
Volume: 3.99M
April 2, 2020 6:30p
P/E Ratio
17.66
Dividend Yield
4.26%
Market Cap
$76.59 billion
Rev. per Employee
$350,368
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/zigman2/quotes/202559280/lastsale
US : U.S.: NYSE
$ 55.21
+0.84 +1.54%
Volume: 12.93M
April 2, 2020 6:30p
P/E Ratio
25.13
Dividend Yield
3.26%
Market Cap
$124.03 billion
Rev. per Employee
$968,283
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/zigman2/quotes/205064656/lastsale
US : U.S.: Nasdaq
$ 158.19
-1.41 -0.88%
Volume: 20.87M
April 2, 2020 4:00p
P/E Ratio
24.58
Dividend Yield
N/A
Market Cap
$454.93 billion
Rev. per Employee
$1.57M
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/zigman2/quotes/210331248/lastsale
US : U.S.: Nasdaq
$ 1,918.83
+11.13 +0.58%
Volume: 4.33M
April 2, 2020 4:00p
P/E Ratio
83.36
Dividend Yield
N/A
Market Cap
$949.76 billion
Rev. per Employee
$359,671
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/zigman2/quotes/202490156/lastsale
US : U.S.: Nasdaq
$ 1,117.03
+14.93 +1.35%
Volume: 2.82M
April 2, 2020 4:00p
P/E Ratio
22.71
Dividend Yield
N/A
Market Cap
$835.52 billion
Rev. per Employee
$1.39M
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/zigman2/quotes/205453964/lastsale
US : U.S.: Nasdaq
$ 1,120.84
+15.22 +1.38%
Volume: 1.96M
April 2, 2020 4:00p
P/E Ratio
22.79
Dividend Yield
N/A
Market Cap
$835.52 billion
Rev. per Employee
$1.39M
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/zigman2/quotes/203649727/lastsale
US : U.S.: Nasdaq
$ 54.35
+2.47 +4.76%
Volume: 27.80M
April 2, 2020 4:00p
P/E Ratio
11.51
Dividend Yield
2.43%
Market Cap
$221.89 billion
Rev. per Employee
$659,665
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/zigman2/quotes/202934861/lastsale
US : U.S.: Nasdaq
$ 244.93
+4.02 +1.67%
Volume: 41.45M
April 2, 2020 4:00p
P/E Ratio
19.34
Dividend Yield
1.26%
Market Cap
$1054.10 billion
Rev. per Employee
$1.98M
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/zigman2/quotes/204659678/lastsale
US : U.S.: Nasdaq
$ 84.41
-0.72 -0.85%
Volume: 22.96M
April 2, 2020 4:00p
P/E Ratio
20.96
Dividend Yield
N/A
Market Cap
$72.95 billion
Rev. per Employee
$832,885
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/zigman2/quotes/202291990/lastsale
US : U.S.: Nasdaq
$ 47.86
-4.14 -7.96%
Volume: 4.98M
April 2, 2020 4:00p
P/E Ratio
12.78
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2.84%
Market Cap
$7.28 billion
Rev. per Employee
$458,082
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/zigman2/quotes/207508890/lastsale
US : U.S.: Nasdaq
$ 65.00
+2.38 +3.80%
Volume: 18.17M
April 2, 2020 4:00p
P/E Ratio
21.24
Dividend Yield
2.52%
Market Cap
$73.50 billion
Rev. per Employee
$86,863
loading...
/zigman2/quotes/209819189/lastsale
US : U.S.: Nasdaq
$ 8.28
-0.09 -1.08%
Volume: 3.27M
April 2, 2020 4:15p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.90 billion
Rev. per Employee
$167,069
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/zigman2/quotes/204817680/lastsale
US : U.S.: Nasdaq
$ 88.75
+0.74 +0.84%
Volume: 3.91M
April 2, 2020 4:00p
P/E Ratio
49.06
Dividend Yield
N/A
Market Cap
$59.77 billion
Rev. per Employee
$242,625
loading...
/zigman2/quotes/201249319/lastsale
US : U.S.: Nasdaq
$ 70.43
+0.35 +0.50%
Volume: 1.47M
April 2, 2020 4:00p
P/E Ratio
17.61
Dividend Yield
3.86%
Market Cap
$9.59 billion
Rev. per Employee
$848,083
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Emily Bary is a MarketWatch reporter based in New York.

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