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Air Travel Demand Aids SkyWest (SKYW) Amid Rising Expenses

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We have recently updated a report on SkyWest, Inc. SKYW.

SkyWest has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of growth.

With improvement in air-travel demand, SkyWest carried 72.2% more passengers in 2021 compared with the year-ago quarter’s level. As a result, the passenger load factor expanded 1820 percentage points to 74.6% in 2021. With air-travel demand continuing to improve, the load factor is likely to be impressive going forward as well.

SKYW's fleet-modernization efforts are commendable as well. To modernize its fleet, SkyWest entered into an agreement with Delta to purchase and operate 16 new E175 aircraft in August. Per the agreement, the 16 new E175 aircraft will be put into service rateably through 2022-end.

Rising maintenance expenses are a concern for SkyWest. Aircraft maintenance, materials and repairs expenses increased 20.3% year over year in 2020. In 2021, expenses for aircraft maintenance, materials and repairs increased even more (32%). Aircraft fuel cost surged 73.4% in 2021, with oil prices moving north. Due to the increase in the components, total operating costs (up 20.8% in 2021) are escalating and limiting the bottom line.

Zacks Rank & Stocks to Consider

SkyWest currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Zacks Transportation sector are J.B. Hunt Transport Services, Inc. JBHT, Union Pacific Corporation UNP and Triton International Limited TRTN.

The long-term expected EPS (three to five years) growth rate for J.B. Hunt is pegged at 15%. JBHT is benefiting from strong performances across all its segments. While the Dedicated Contract Services (DCS) unit is being aided by fleet-productivity improvement and a rise in average revenue-producing trucks, the Integrated Capacity Solutions (ICS) unit is gaining from favorable customer freight mix as well as higher contractual and spot rates.

JBHT’s measures to reward shareholders are encouraging. Driven by the tailwinds, the stock has increased 28.8% in the past year. J.B. Hunt currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected EPS (three to five years) growth rate for Union Pacific is pegged at 10%. With economic activities gaining pace, freight revenues (accounting for a bulk of the top line) are improving. Freight revenues increased 11% year over year in 2021. Segment-wise, freight revenues in 2021 increased 12%, 11% and 11% in the bulk, industrial and premium units, respectively.

Driven by the tailwinds, the stock has increased 17.3% in the past year. UNP currently carries a Zacks Rank #2 (Buy).

The long-term expected EPS (three to five years) growth rate for Triton is pegged at 10%. Gradual increases in trade volumes and container demand bode well for the company. With easing coronavirus-led restrictions in the United States and Europe, the company saw a strong rebound in its business in the third, the fourth of 2020 as well as in each of the four quarters of 2021.

Driven by the tailwinds, the stock has increased 12.2% in the past year. TRTN currently carries a Zacks Rank #2.


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Union Pacific Corporation (UNP) : Free Stock Analysis Report
 
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
 
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
Triton International Limited (TRTN) : Free Stock Analysis Report
 
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