Southwest Airlines (NYSE:LUV) & American Airlines Group (NASDAQ:AAL) Critical Survey

Southwest Airlines (NYSE:LUV) and American Airlines Group (NASDAQ:AAL) are both industrials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, earnings, profitability, risk, analyst recommendations, valuation and dividends.

Valuation & Earnings

This table compares Southwest Airlines and American Airlines Group”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southwest Airlines	$28.06 billion	0.78	$441.00 million	$2.08	21.37
American Airlines Group	$54.63 billion	0.16	$111.00 million	($0.73)	-18.05

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

Volatility and Risk

Southwest Airlines has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500. Comparatively, American Airlines Group has a beta of 1.45, indicating that its stock price is 45% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Southwest Airlines and American Airlines Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southwest Airlines	3	9	11	0	2.35
American Airlines Group	2	10	9	0	2.33

Southwest Airlines currently has a consensus price target of $48.20, indicating a potential upside of 8.41%. American Airlines Group has a consensus price target of $17.28, indicating a potential upside of 31.09%. Given American Airlines Group’s higher possible upside, analysts plainly believe American Airlines Group is more favorable than Southwest Airlines.

Insider and Institutional Ownership

80.8% of Southwest Airlines shares are held by institutional investors. Comparatively, 52.4% of American Airlines Group shares are held by institutional investors. 0.9% of Southwest Airlines shares are held by company insiders. Comparatively, 0.7% of American Airlines Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Southwest Airlines and American Airlines Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Southwest Airlines	3.34%	18.05%	4.44%
American Airlines Group	-0.79%	-9.11%	-0.38%

Summary

Southwest Airlines beats American Airlines Group on 11 of the 14 factors compared between the two stocks.

About Southwest Airlines

Southwest Airlines Co. operates as a passenger airline company that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2023, the company operated a total fleet of 817 Boeing 737 aircraft; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as ten 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 provides inflight entertainment and connectivity services on Wi-Fi enabled aircraft; and Rapid Rewards loyalty program that enables program members to earn points for dollars spent on Southwest base fares. In addition, the company offers a suite of digital platforms to support customers’ travel needs, including websites and apps; and SWABIZ, an online booking tool. Further, it provides ancillary services, such as Southwest’s EarlyBird Check-In, upgraded boarding, and transportation of pets and unaccompanied minors. Southwest Airlines Co. was incorporated in 1967 and is headquartered in Dallas, Texas.

About American Airlines Group

American Airlines Group Inc., through its subsidiaries, operates as a network air carrier. The company provides scheduled air transportation services for passengers and cargo through its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C., as well as through partner gateways in London, Doha, Madrid, Seattle/Tacoma, Sydney, and Tokyo. It operates a mainline fleet of 965 aircraft. The company was formerly known as AMR Corporation and changed its name to American Airlines Group Inc. in December 2013. American Airlines Group Inc. was founded in 1926 and is headquartered in Fort Worth, Texas.