Southwest slashes full-year 2026 earnings forecast on fuel-cost spike

What happened

Southwest Airlines sharply cut its full-year 2026 adjusted earnings forecast on Wednesday, citing a surge in fuel costs. The carrier now expects adjusted EPS of $2.60 to $2.85, down from its prior $3.25–$4.25 guidance range issued in July; the new midpoint sits below Wall Street's $2.85 consensus (LSEG). Southwest also guided Q4 earnings below Street expectations. Q3 fuel cost came in at $3.92/gal vs. the airline's $3.70–3.75 assumption, adding $821 million in fuel expense year over year — a $1.08 headwind to adjusted EPS in the quarter alone — and it projects Q4 fuel at ~$4.55/gal. The miss on costs overshadowed an otherwise solid quarter: adjusted Q3 EPS of 66 cents beat the 58-cent consensus, revenue hit a record $8.4 billion, and average fares jumped nearly 27%.

Who’s affected

• Southwest (LUV): direct guidance cut, Q4 EPS guide below Street
• Airline sector (UAL, DAL, AAL): industry-wide fuel margin squeeze; United already flagged weak Q4 guidance Oct 21
• Refiners (VLO, MPC): benefit from wide crack spreads and record diesel pricing
• Travel/leisure demand read-through

Sources

news.marketflux.io985theriver.com