Southwest Airlines' (LUV) new credit card agreement is "clearly a positive" that was not modeled into previous expectations, BofA Securities said in a Friday note.

The card agreement could support the airline's Q1 unit revenue to grow by nearly 10%, higher than BofA's expectations of a 5.5% increase, the analysts said.

Analysts also noted that while bag fees and the new premium seating features were expected to add $1 billion in incremental 2026 earnings, the airline can now also recognize revenue from the loyalty program more quickly than before.

BofA said that if Southwest Airlines hit its 2026 forecasts, its pre-tax margins would be close to 9%, in line with the brokerage's forecast for United Airlines (UAL) and about 100 basis points below Delta Air Lines (DAL).

BofA analysts raised the company's 2026 earnings estimate to $4.36 per share from $3.60 per share.

Analysts reiterated an underperform rating on the stock, but raised its price target to $42 from $37.

Southwest Airlines shares were up 1% in recent Friday trading.

Price: 48.90, Change: +0.47, Percent Change: +0.97