SkyWest (SKYW) Hits 52-Week High: What's Driving the Stock?

Shares of SkyWest SKYW scaled a 52-week high of $53.90 on Dec 11, before retracing a bit to close the session at $53.85. In fact, the stock has performed very well in the last six months. While SkyWest has rallied 43.6%, the Zacks Airline industry’s gained 1% in the same time frame.

 

Catalysts Behind the Upsurge

SkyWest’s efforts to modernize its fleet and streamline operations are impressive. In sync with this, the company aims to reduce the 50-seat jets in its fleet and add new E175 aircraft.

Additionally, this St. George, Utah-based carrier inked aircraft purchase and capacity purchase  deals with Delta Air Lines DAL and Alaska Air Group’s ALK wholly-owned subsidiary, Alaska Airlines, in October 2017. Per the agreements, SkyWest’s wholly-owned subsidiary — SkyWest Airlines — will operate15 Embraer E175 SC aircraft (70 seats) and five Embraer E175 aircraft (76 seats) under Delta and Alaska Airlines, respectively.

So far this year, the company has also witnessed a decline in block hours (a measure of aircraft utilization) due to its fleet transition efforts. The presence of E175 planes in its fleet resulted in approximately 139,200 additional block hours. However, the presence of other types of planes in its fleet resulted in a decline of approximately 232,500 block hours, causing the metric to fall 5.2% year to date.

We note that it has been proven historically that an earnings surprise is reflective of the true health of a company. An impressive track record in this respect generally acts as a catalyst behind stock price appreciation. Also, earnings surprise history indicates a company’s consistency in beating market estimates. Generally, investors take into account a company’s upbeat earnings history while deciding to buy a stock. While arriving at this investment decision, they expect that it will continue reporting better-than-expected earnings per share in its next releases.

In this context, the carrier’s impressive track record with respect to earnings per share seems to be encouraging.  SkyWest outperformed the Zacks Consensus Estimate in each of the last 13 quarters. In the third quarter of 2017, this regional carrier performed very impressively reporting better-than-expected earnings and revenues. We expect the carrier to continue performing impressively on the bottom-line front in the near term as well.

Moreover, the company’s efforts to reward shareholders through dividends and share buybacks raise optimism in the stock.  In February 2017, the company hiked its quarterly dividend by 60%. Also, SkyWest’s expansion-related efforts are impressive.

The above bullish factors are reflected in the company’s Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

Estimate Revisions & Style Score

Upward estimate revisions reflect optimism in a stock’s prospects. SkyWest scores impressively on this front as well. The stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised 4.5% upward over the last 90 days. Similarly, the consensus mark for current-year earnings has been revised 2.5% upward in the same time span.

Additionally, the stock has an attractive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.

Taking into account the above-mentioned tailwinds and the favorable readings, we believe that the current price represents an attractive entry point for investors. The carrier’s bullish Zacks Rank also supports our view.

Stock to Consider

Apart from SkyWest, investors interested in the airline space may also consider Gol Linhas Aereas Inteligentes S.A. GOL sporting a Zacks Rank #1.

Shares of Gol Linhas have soared more than 200% in a year.
 

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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
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