Southwest Airlines (NYSE:LUV) and China Eastern Airlines (NYSE:CEA) are both transportation companies, but which is the superior stock? We will compare the two companies based on the strength of their profitability, valuation, earnings, analyst recommendations, dividends, institutional ownership and risk.

Profitability

This table compares Southwest Airlines and China Eastern Airlines’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Southwest Airlines 16.90% 22.16% 8.50%
China Eastern Airlines 3.91% 7.21% 1.86%

Analyst Ratings

This is a summary of recent ratings for Southwest Airlines and China Eastern Airlines, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Southwest Airlines 0 3 13 0 2.81
China Eastern Airlines 0 2 3 0 2.60

Southwest Airlines presently has a consensus price target of $69.67, suggesting a potential upside of 12.26%. Given Southwest Airlines’ stronger consensus rating and higher possible upside, equities analysts clearly believe Southwest Airlines is more favorable than China Eastern Airlines.

Volatility and Risk

Southwest Airlines has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500. Comparatively, China Eastern Airlines has a beta of 1.62, meaning that its stock price is 62% more volatile than the S&P 500.

Valuation & Earnings

This table compares Southwest Airlines and China Eastern Airlines’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Southwest Airlines $21.17 billion 1.68 $3.49 billion $3.50 17.73
China Eastern Airlines $15.17 billion 0.62 $938.61 million $3.26 9.91

Southwest Airlines has higher revenue and earnings than China Eastern Airlines. China Eastern Airlines is trading at a lower price-to-earnings ratio than Southwest Airlines, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

78.0% of Southwest Airlines shares are owned by institutional investors. Comparatively, 0.4% of China Eastern Airlines shares are owned by institutional investors. 0.2% of Southwest Airlines shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Dividends

Southwest Airlines pays an annual dividend of $0.64 per share and has a dividend yield of 1.0%. China Eastern Airlines pays an annual dividend of $0.36 per share and has a dividend yield of 1.1%. Southwest Airlines pays out 18.3% of its earnings in the form of a dividend. China Eastern Airlines pays out 11.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Southwest Airlines has increased its dividend for 6 consecutive years. China Eastern Airlines is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Southwest Airlines beats China Eastern Airlines on 14 of the 17 factors compared between the two stocks.

Southwest Airlines Company Profile

Southwest Airlines Co. operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2017, the company operated a total of 706 Boeing 737 aircraft; and served 100 destinations in 40 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. It also sells frequent flyer points and related services to business partners participating in the Rapid Rewards frequent flyer program, such as car rental agencies, hotels, restaurants, and retailers. In addition, the company offers a suite of digital platforms to support customers' needs across the travel journey, including Southwest.com, mobile.southwest.com, an iOS app, an android app, an email subscription service, and push notifications; and Swabiz.com, a Website for business customers that offer businesses shared stored company credit cards, company activity reporting, and centralized traveler management services. Southwest Airlines Co. was founded in 1967 and is based in Dallas, Texas.

China Eastern Airlines Company Profile

China Eastern Airlines Corporation Limited, together with its subsidiaries, operates in the civil aviation industry in the People's Republic of China and internationally. The company offers passenger, cargo, mail delivery, ground, cargo handling, tour operations, air catering, and other extended transportation services. It is also involved in flight training; airline maintenance and consultation; import and export, investment, leasing, and consultation; hotel services; travel and air ticketing agency and transportation; the research and development of technology and products in the field of aviation; and e-commerce platform activities. As of December 31, 2017, the company operated a fleet of 637 aircraft, including 627 passenger aircraft and 10 business aircraft. China Eastern Airlines Corporation Limited was founded in 1988 and is headquartered in Shanghai, the People's Republic of China. China Eastern Airlines Corporation Limited is a subsidiary of China Eastern Air Holding Company Limited.

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