Cashflow Beast – Southwest Airlines Co (LUV)

Johnny HopkinsStocksLeave a Comment

Starting this week I’ll be providing a series of articles on Cashflow Analysis and Capital Allocation on the Top 30 companies in our Large Cap 1000 Screener, which incidentally you can access for free here.

Today, I’m going to take a look at Southwest Airlines Co (NYSE:LUV).

One of the things I like most about Southwest can be found in a quick analysis of the company’s latest statement of cashflows for the six months ending June 30, 2016.

Here’s a quick analysis of the company’s statement of cashflows for the six months ending June 30, 2016.

All amounts in millions)
Net Income 1,333
Operating Cashflow 2,728
Investing Cashflow -849
CF After Investing 1,879
Dividends -160
Other 24
Total Other 24
Funding Surplus 1,743
Debt Capital In/Out
Repayment of long-term debt -103
Short term borrowings
Issuance of long-term debt
Net change in short-term debt
Principal payments under capital leases
Net Debt -103
Equity Capital In/Out
Common stock repurchases -1,200
Purchase of Treasury Stock
Issuance of Treasury Stock
Issuance of Common Stock
Proceeds from the exercise of stock options 17
Net Equity Capital -1,183
Cash Movement 457
Bank Account Open 1,583
Back Account Close 2,040

Southwest had $$2.73 Billion in operating cashflows for the six month period ending June 30, 2016. When you subtract its entire investing cashflows of ($849 million), the company had cashflows after investing of $1.88 Billion.

With this excess it paid dividends of $160 Million and other financing costs of $24 Million. This left $1.74 Billion in funding surplus.

So what did it do with this funding surplus? Southwest paid down debt of $103 Million and repurchased $1.2 Billion worth of its own shares which still left $457 million to stick in the bank.

When you add this to the $1.58 Billion that the company already had in the bank, that leaves it with a total of $2.04 Billion for a rainy day.

But there’s more…

Southwest currently has $3.415 Billion in cash and cash equivalents, and with total debt of $3.354 Billion, that means the company could pay off its entire debt with its current cash and cash equivalents and still have $61 Million in the bank.


Southwest currently has an Enterprise Value of $25.96 Billion, just under its current market cap of $26 Billion, and is selling at 5.6 times operating earnings, and a P/E of 11.3.

The company also has a nice little FCF/EV yield of 7% and a shareholder yield of 5% (Buyback Yield 4%, Dividend Yield 1%).

For me, there’s a lot to like about Southwest Airlines Co. (NYSE:LUV).

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