Southwest Airlines was the biggest decliner on the S&P 500 on Tuesday after the carrier lowered its outlook for a fourth-quarter revenue metric.
The Dallas-based airline said it expected revenue per available seat mile, a measure of airline efficiency, to be “flat to down 1.0 per cent” in the current quarter, compared with a year ago. Its previous forecast had been for 1 per cent growth.
“The company’s unit revenue weakness is likely due to leaving low-fare buckets open longer than initially expected,” said Helane Becker, an analyst at Cowen & Co.
Southwest said it had flown 9.7bn revenue passenger miles, a gauge of passenger traffic, in November, an increase of 13.9 per cent from a year ago.
But it was the downbeat outlook on which investors focused, sending shares in Southwest, which have advanced nearly 9 per cent this year, 7 per cent lower to $46.10.
Airline stocks have come under pressure this year from concerns that carriers will boost capacity and cut ticket prices in an effort to win market share.
The news sent the NYSE Arca airline index, which includes global carriers, down 2.3 per cent, trimming the sector’s gains of the past two days on the back of lower oil prices.
A US antitrust regulator’s move to block its acquisition of rival Office Depot prompted an analyst downgrade that pushed shares in Staples 4.6 per cent lower to $10.16.
The Federal Trade Commission filed a complaint on Monday to block the $6.3bn deal, arguing that the proposed merger would “significantly” reduce competition and drive up prices for consumers.
KeyBanc downgraded Staples from “overweight” to “sector weight” and removed its price target.
“Following Monday’s news, we are unable to estimate the likelihood of a deal, and are left with concerns about the underlying businesses,” said analyst Bradley Thomas.
Shares in Chipotle found no relief after it said it had closed one of its restaurants in Boston while it investigated “a number of illnesses among Boston college students”.
But the Mexican restaurant chain said it did “not have any evidence” to suggest the incident was related to an E.coli outbreak.
The Denver-based company’s sales trends have been “extremely volatile” in the current quarter after an outbreak of the infectious illness was linked to its restaurants.
Shares in United Natural Foods fell 17 per cent to $34.54 after it cut its full-year outlook and reported disappointing fiscal first-quarter earnings.
The organic foods distributor expects 2016 revenue in a range of $8.43 to $8.59bn, below its previous estimates for $8.51bn-$8.67bn. This compared with Wall Street’s estimates for $8.48bn.
Net income fell nearly 9 per cent to $30.1m, or 60 cents a share, in the three months to the end of October, below analysts’ expectations.
A third day of declines in oil prices weighed on US stocks, but with the sell-off in Southwest’s shares it was the industrials sector that fell the most on the benchmark S&P 500.
At midday the S&P 500 was down 0.6 per cent to 2,064.68, the Dow Jones Industrial Average had declined 0.8 per cent to 17,589.54 and the Nasdaq Composite was 0.2 per cent lower at 5,090.69.
Financial Times
Southwest Airlines shares take a nose dive
