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Thursday, October 09, 2008
S&P Cuts Southwest Airlines To 'BBB+' From 'A-'
Sue Chang
MarketWatch Pulse
SAN FRANCISCO -- Standard & Poor's Ratings Services on Thursday lowered Southwest Airlines Co.'s ratings, including its long-term corporate credit rating to BBB+ from A-. BBB-grade is the lowest in the investment grade category. The move reflects a weakening in the company's financial profile on volatile fuel prices, pressure on revenues due to a weaker economy, and a more negative outlook on the U.S. airline industry. "The downgrade is based on a moderate weakening in the company's still-strong financial profile that began in late 2007 and continued into 2008. While we expect Southwest's earnings to improve in 2009, reflecting continuing benefits from the company's fuel-hedging program and potential market share gains as its competitors reduce capacity in many of its markets, we don't expect its credit metrics to return to the peak levels reached in 2007," said Betsy Snyder, an S&P credit analyst. The outlook is stable.
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Most folks judge the health of a business by the revenue that comes in through sales. But not all revenue is equal. Companies can grow their sales by buying other companies, which means you don't get a clear view of how the real sales trends are moving.
So, many analysts, particularly those who look at retail, try to gauge what¿s known as "organic" growth, by looking at same-store sales. These are sales only at outlets open more than a year, so the metric can exclude any sales jump that comes from opening new locations. Retailers release same-store sales (which are frequently called "comps" since they're a true comparison from the previous period) every month.
Retail, incidentally, isn't the only industry to look at same-store sales. Hospital companies, also use the metric, to gauge how existing hospitals are performing compared to ones they just built or acquired.
