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Is a Beat in Store for SkyWest (SKYW) This Earnings Season?

SkyWest, Inc. SKYW is scheduled to report fourth-quarter 2018 results on Jan 31, after market close.

In the third quarter, the company delivered impressive results, with earnings and revenues beating the Zacks Consensus Estimate. The bottom line was favored by a lower effective tax rate. Also, the top line benefited from the company’s improved fleet mix.

SkyWest has an impressive earnings surprise history. The company’s earnings surpassed the consensus mark in each of the trailing four quarters, the average being 16.1%.

Factors at Play

SkyWest is expected to perform well in the fourth quarter on the back of efforts to modernize fleet and streamline operations. Apart from removing unproductive aircraft, the company continues to add new and modernized planes as well as aircraft to the fleet. These additions are expected to enhance growth and generate strong cash flows in the to-be-reported quarter.

The current tax law is a boon for U.S.-based transportation companies like SkyWest. The significant cut in corporate tax rate is likely to boost cash flow, which will drive the bottom line in the to-be-reported quarter. Additionally, with oil prices declining nearly 40% in the October-December period, fuel costs are expected to be less of a headwind in the to-be-reported quarter.

However, fleet transition related expenses and incentives to retain pilots are expected to dent the bottom line in the to-be-reported quarter.

We are also concerned about the company’s high debt levels. In October 2018, SkyWest decided to invest a substantial amount by raising long-term debt of approximately $160 million, which is in sync with the company’s fleet transition plans. This is likely to increase the carrier’s debt load.

SkyWest, Inc. Price and EPS Surprise

 

SkyWest, Inc. Price and EPS Surprise | SkyWest, Inc. Quote

 

What Does the Model Say?

Our proven model shows that SkyWest is likely to beat estimates in the to-be-reported quarter, as it has the perfect combination of the following key ingredients.

Earnings ESP: SkyWest has an Earnings ESP of +2.77%. The Most Accurate Estimate is at $1.12 per share, higher than the Zacks Consensus Estimate of $1.09.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: SkyWest sports a Zacks Rank #1 (Strong Buy). Notably, stocks with a favorable Zacks Rank #1, 2 (Buy) or 3 (Hold) have higher chances of beating estimates.

Conversely, we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Investors interested in the Zacks Transportation sector may check other companies that have the right combination of elements to beat estimates in the upcoming releases.

Expeditors International of Washington, Inc. EXPD has an Earnings ESP of +0.39% and a Zacks Rank #1.  The company will release fourth-quarter 2018 results on Feb 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

Copa Holdings, S.A. CPA has an Earnings ESP of +6.93% and a Zacks Rank #2. The company will release fourth-quarter 2018 results on Feb 13.

Old Dominion Freight Line, Inc. ODFL has an Earnings ESP of +1.85% and a Zacks Rank #3.  The company will release fourth-quarter 2018 results on Feb 7.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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