BMO Capital upgraded Southwest Airlines (NYSE:LUV) from Market Perform to Outperform on Friday, while increasing its price target to $57.50 from $43.00. At the time of the upgrade the stock was trading at $48.50, just under its 52-week high of $49.12, after a 59.5% rise over the prior six months.
The research firm said the move reflects confidence in Southwest’s ongoing initiatives, which it believes are generating meaningful momentum and present potential for upside to earnings. BMO singled out the prospect of material profit improvement over time as a core reason for raising its rating.
BMO Capital’s estimates include a projection that Southwest’s earnings could reach at least $4.00 per share in 2026, a notable increase from the $0.93 per share level the firm expects for 2025. In addition to its numerical forecast, BMO identified several potential growth levers beyond management’s published outlook, including a possible recovery in domestic main cabin market conditions and an opportunity for Southwest to grow its share of corporate travel.
The analyst note also emphasized balance-sheet strength, an established domestic route network and steady operational execution as factors that provide a foundation for longer-term opportunities.
Separately, Southwest reported fourth-quarter 2025 results showing earnings per share of $0.58, narrowly above the $0.57 analysts had forecast. The company’s revenue for the quarter was $7.4 billion, which fell short of the $7.5 billion that had been expected.
Despite the revenue shortfall, Southwest shares climbed sharply on news of robust forward guidance and operational achievements, a market reaction that BMO and other observers say reflects investor optimism about the company’s trajectory. The firm noted that analysts have not yet provided updates to ratings or signaled additional upgrades or downgrades following the quarter.
Overall, the developments underscore how closely investor sentiment on an airline can track the combination of reported earnings, revenue outcomes and forward-looking commentary from management and analysts. Southwest’s current performance profile — an improving earnings outlook, a recent EPS beat, and a revenue miss — has driven renewed market interest while leaving some near-term questions open.