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Southwest Airlines shares sink on unit revenue growth concerns

  • Southwest Airlines beat estimates on earnings per share and revenue.
  • However, the stock was sharply lower Thursday, down about 7 percent at one stage in early trading, on investor concerns over slowed unit growth revenue.

Shares of Southwest Airlines were hit hard in early Thursday trading before recovering slightly. Investors were expressing concern over slower unit revenue growth.

Despite reporting better-than-expected quarterly earnings and revenue Thursday, the stock was down more than 7 percent at one stage.

Here's what Southwest reported versus what Wall Street was expecting:

  • Earnings per share: $1.24 adjusted compared with $1.20 expected, according to Thomson Reuters
  • Revenue: $5.74 billion vs. $5.72 billion Thomson Reuters estimate

Unit revenue grew at the Dallas-based airline, but more slowly than other airlines. Southwest reported 1.5 percent growth in the second quarter.

JetBlue Airways, for instance, posted growth of 7 percent in the same category.

"We did 1.5 [percent] over last year, considering that we had a brand-new reservation system," Southwest Chairman and CEO Gary Kelly told CNBC shortly after the airline released results.

In a note, Kevin Crissey, a senior analyst at Citi Research, said Southwest's capacity growth is "a top concern of investors."

Excluding special items, second-quarter net income was $748 million compared with $757 million in the year-earlier period. Total operating revenue increased 6.7 percent.

Kelly was confident about the future after what he called "a really solid performance," saying in a "Squawk on the Street" interview "there's nothing different at Southwest today than three months ago."