In the midst of unions calling for his ousting, Gary Kelly, CEO of Southwest Airlines (LUV, Financial) bought shares in the company on Aug. 2.
Last week, four of the company’s largest unions called for Kelly to step down following a major system crash in July, which delayed or canceled several thousand flights over the course of three days. In addition, they complained of delays in contract negotiations, cost cutting and executives spending billions buying back company stock.
On Aug. 4, Kelly released a statement to Southwest employees, assuring them he was not going anywhere and that he was concentrating on resolving the issues at hand.
Kelly bought 28,106 shares at an average price of $35.58, increasing the number of shares he owns to 575,010.
Southwest has a market cap of $22.9 billion with an enterprise value of $23.02 billion. It has a price-earnings (P/E) ratio of 10 with a forward P/E of 9.8. It has a price-book (P/B) ratio of 3 and its price-sales (P/S) ratio is 1.2. Its operating margin is 21.8% and its net margin is 11.9%. GuruFocus ranked Southwest’s financial strength 6 of 10 and its profitability and growth 8 of 10.
Previously, Kelly sold shares in November 2015.
Southwest Airlines has a Piotroski F-Score of 7, indicating a healthy business. However, as of today, its Altman Z-Score is 2.92, indicating it is in some sort of financial stress, possibly due to repercussions surrounding the call for Kelly’s removal. However, the score is closer to the Safe Zone of 2.99 than it is the Distress Zone, which would score 1.81 or below.
Two other insider trades occurred following Kelly’s purchase. William Cunningham, director, and Michael Van de Ven, executive vice president and chief operating officer, bought shares on Aug. 3.
Gurus invested in Southwest include T. Rowe Price Equity Income Fund, PRIMECAP Management (Trades, Portfolio), David Tepper (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Joel Greenblatt (Trades, Portfolio), Steven Cohen and George Soros (Trades, Portfolio), among others.
On Monday, picketers representing Southwest flight attendants gathered outside of airports across the country, including airports in Dallas, Houston, Chicago and Las Vegas, to voice their grievances and further call for change within the company’s leadership.
View Kelly’s filing with the SEC here.
Disclosure: I do not own stock in any companies mentioned in the article.
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