Source: Southwest Airlines

Southwest Airlines (NYSE:LUV) is on a roll. The company today posted fiscal third-quarter results that set a new profit record, with adjusted earnings soaring 62% to $0.55 per share. On that basis, Wall Street analysts were expecting per-share profit of $0.53. Investors were pleased with the results, sending the stock slightly higher in premarket trading.

A supersonic quarter
Southwest's revenue improved by 6% over the prior year period to $4.8 billion, which was in line with analysts' expectations. Impressively, the airline managed to boost revenue despite the fact that it's AirTran aircraft transition resulted in fewer overall trips and fewer seats flown.

Here are a few more highlights from the results:

  • Return on invested capital grew to 19% over the trailing 12 months, nearly double the figure from the prior year and ahead of management's 15% goal
  • Operating margin rose by four percentage points to 13.5%
  • Fuel costs fell to $2.94 a gallon from last quarter's $3.02 and the prior year's $3.06
  • Free cash flow grew to $1.4 billion over the past nine months
  • The company returned $241 million in cash to shareholders through dividends and stock repurchases

Management pointed to record load factors and Southwest's revamped frequent flyer rewards program as key reasons for its strong revenue performance. Meanwhile, cost discipline and falling fuel prices did their parts to supercharge profit growth. "We are very pleased to report another record quarterly profit performance, which resulted in $100 million third quarter 2014 profit sharing for our employees," CEO Gary Kelly said in a press release.

Positive outlook
Looking ahead, there are a number of tailwinds that could keep pushing Southwest's results further into record territory in the coming quarters. More international destinations are one prime example. Having successfully taken on AirTran's routes to the Bahamas and Mexico this summer, the company now plans to start service to Punta Cana, Dominican Republic, and Mexico City, Mexico, next month. Meanwhile, a lifting of regulatory restrictions at Southwest's Dallas, Texas, hub will allow for 17 new nonstop flights from that airport.

Fuel costs are also expected to continue diving, which should keep boosting those profits. Southwest projected a per gallon fuel price of $2.75 in the fourth quarter as compared to $3.05 in the prior year and $2.94 for the quarter that just closed.

Management provided some color on current business trends, saying that Q3's solid momentum is so far carrying into the fourth quarter. October revenue has been growing at a similarly strong pace, the company said, and bookings for November and December are also good. 

Wall Street analysts as of this morning were expecting Southwest to book a 48% earnings jump next quarter and a 4% revenue boost to $4.6 billion. Those would be impressive results, but they seem quite achievable given this past quarter's performance and the early Q4 trends.