Contrasting LATAM Airlines Group (NYSE:LTM) & Southwest Airlines (LUV)

LATAM Airlines Group (NYSE: LTM) and Southwest Airlines (NYSE:LUV) are both transportation companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, risk, earnings, dividends, analyst recommendations, institutional ownership and profitability.

Volatility & Risk

LATAM Airlines Group has a beta of 1.74, suggesting that its stock price is 74% more volatile than the S&P 500. Comparatively, Southwest Airlines has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500.

Valuation & Earnings

This table compares LATAM Airlines Group and Southwest Airlines’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
LATAM Airlines Group $9.61 billion 0.75 $155.30 million $0.26 45.62
Southwest Airlines $21.17 billion 1.42 $3.49 billion $3.50 14.84

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

Dividends

LATAM Airlines Group pays an annual dividend of $0.03 per share and has a dividend yield of 0.3%. Southwest Airlines pays an annual dividend of $0.64 per share and has a dividend yield of 1.2%. LATAM Airlines Group pays out 11.5% of its earnings in the form of a dividend. Southwest Airlines pays out 18.3% 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 raised its dividend for 6 consecutive years. Southwest Airlines is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

Net Margins Return on Equity Return on Assets
LATAM Airlines Group 2.05% 4.74% 1.07%
Southwest Airlines 16.95% 23.25% 8.80%

Insider & Institutional Ownership

3.2% of LATAM Airlines Group shares are owned by institutional investors. Comparatively, 80.2% of Southwest Airlines shares are owned by institutional investors. 7.8% of LATAM Airlines Group shares are owned by company insiders. Comparatively, 0.2% of Southwest Airlines shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LATAM Airlines Group 2 2 0 0 1.50
Southwest Airlines 0 3 17 0 2.85

LATAM Airlines Group presently has a consensus price target of $17.00, suggesting a potential upside of 43.34%. Southwest Airlines has a consensus price target of $68.22, suggesting a potential upside of 31.35%. Given LATAM Airlines Group’s higher probable upside, research analysts plainly believe LATAM Airlines Group is more favorable than Southwest Airlines.

Summary

Southwest Airlines beats LATAM Airlines Group on 12 of the 17 factors compared between the two stocks.

About LATAM Airlines Group

LATAM Airlines Group S.A., together with its subsidiaries, provides passenger and cargo air transportation services in Peru, Argentina, the United States, Colombia, Brazil, Ecuador, Chile, rest of Latin America, Europe, and the Asia Pacific. The company operates in two segments, Air Transportation; and Coalition and Loyalty Program Multiplus. It provides passenger transport services to approximately 137 destinations in 24 countries and cargo services to approximately 144 destinations in 29 countries with a fleet of 307 aircraft. The company was formerly known as LAN Airlines S.A. and changed its name to LATAM Airlines Group S.A. in June 2012. LATAM Airlines Group S.A. was founded in 1929 and is based in Santiago, Chile.

About Southwest Airlines

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, Turks, and Chaos. 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.

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