Analysts are starting to lose conviction in Southwest Airlines

Deutsche Bank just moved to the sidelines in Southwest Airlines Co (NYSE: LUV) as it’s still struggling to push its revenue back to the pre-pandemic level.

Southwest had a relatively weak second quarter

The air carrier came roughly in line with FactSet consensus in its second financial quarter. Still, Michael Linenberg told clients in a research note:

The Deutsche Bank analyst downgraded Southwest Airlines stock to “hold” on Friday.

Linenberg is disappointed primarily because the airline said it will likely continue to wrestle with higher costs and lower unit revenue in its current quarter. Its shares pay a dividend yield of 2.14% at writing.

Southwest issued downbeat guidance for Q3

Southwest Airlines expects up to 76 cents of per-share earnings in its third quarter – materially below expectations. According to Michael Linenberg:

Note that the air carrier is committed to year-on-year margin expansion in fiscal 2023. Still, Raymond James also downgraded Southwest Airlines stock on Friday.

Analyst Savanthi Syth dubbed it a “Texas-size heartache” and said profitability was unlikely to recover to pre-COVID levels until late 2024 or even 2025. The airline stock currently pays a dividend yield of 2.14%.