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SkyWest (SKYW) Stock Down 43.2% Since February: Here's Why

Zacks Equity Research
·3 min read

Shares of SkyWest SKYW have lost 43.2% since the beginning of February compared with the industry’s 39.9% decline.



Let’s dig deeper to unearth the hounding confronting this St. George, UT- based regional carrier.

Akin to other carriers, SkyWest has been hit by plummeting air-travel demand due to the coronavirus pandemic. Uncertainty around air travel was mainly responsible for the 55.6% plunge in the bottom line during first-quarter 2020. Additionally, passenger load factor (percentage of seats filled by passengers) deteriorated 11.1 percentage points to 67.5% due to waning air-travel demand. With the rising incidence of COVID-19 cases in the United States amid fears of a second wave, the company's second-quarter 2020 performance may also take a hit.

Further, high operating expenses are hurting the bottom line. Notably, total operating expenses increased 5.8% in the March quarter on a year-over-year basis due to higher aircraft maintenance, materials and repairs as well as depreciation and amortization costs. With results being dampened by the coronavirus pandemic, the elevation in costs poses an added challenge to the bottom line.

Moreover, SkyWest’s fleet modernization plans may get hampered by lackluster air-travel demand. However, the company is working on fleet solutions with major airline partners to tide over this unprecedented crisis. For instance, it already has an agreement with American Airlines AAL for 20 new E175 planes and is in talks to announce new delivery dates. The new E175 planes were originally scheduled to be delivered by 2021.

Estimate Revision & Zacks Rank

The fact that the Zacks Consensus Estimate for 2020 earnings has been revised 53.8% downward over the past 60 days is indicative of the pessimism surrounding this currently Zacks Rank #5 (Strong Sell) stock. Moreover, the Zacks Consensus Estimate for 2020 earnings currently indicates an 80.5% decline from the actual earnings figure of 2019.

Key Picks

Some better-ranked stocks in the Zacks Transportation sector are Canadian Pacific Railway Limited CP and Teekay Tankers Ltd. TNK, both presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings of both Canadian Pacific and Teekay Tankers surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 4.9% for Canadian Pacific and 18% for Teekay Tankers.

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American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
Canadian Pacific Railway Limited (CP) : Free Stock Analysis Report
 
Teekay Tankers Ltd. (TNK) : Free Stock Analysis Report
 
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