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SkyWest (SKYW) Strong on Fleet Upgrade and Dividend Hike

Zacks Equity Research
After stumbling into the bear market territory in the second half of last year, the U.S. biotechnology sector recovered in the first six months of this year.

We recently issued an updated report on SkyWest SKYW. The carrier has been seeing developments of late on the back of its fleet modernization efforts and shareholder-friendly approach.

Last month, this St. George, UT-based carrier reported impressive fourth-quarter 2018 results. The company’s earnings came in at $1.28 per share, which surpassed the Zacks Consensus Estimate of $1.09. The bottom line also improved 58% on a year-over-year basis.

Quarterly revenues of $803.5 million exceeded the Zacks Consensus Estimate of $789.6 million and also increased year over year on the company’s improved fleet mix.

SkyWest’s efforts to modernize its fleet and streamline operations are also commendable. The company aims to reduce the 50-seat jets from its fleet and add new E175 aircraft. To this end, the carrier reported a 3.7% decrease in block hours (a measure of aircraft utilization) during the fourth quarter of 2018.

The company’s efforts to reward its shareholders through dividends and buybacks are added positives. Evidently, SkyWest increased its quarterly dividend payment by 20% to 12 cents per share (48 cents annualized) in February 2019. The carrier is active on the buyback front as well. In February 2019, SkyWest announced that its board of directors has approved a new share repurchase program worth $250 million. Massive savings owing to the lowered tax rate, courtesy of the current tax law, is a boon in this respect.

We are positive on SkyWest's sale of its subsidiary, ExpressJet Airlines, to a United Airlines joint venture. Notably, United Airlines is United Continental’s UAL wholly-owned subsidiary. The transaction was completed in January 2019.

By getting rid of ExpressJet, SkyWest is able to focus more on its profit-making areas. We note that ExpressJet, which was acquired by SkyWest in 2010, was struggling with respect to profitability.

Moreover, SkyWest has witnessed the Zacks Consensus Estimate for current-year earnings being revised upward to the tune of 5.3% over the last 60 days, reflecting the positivity surrounding it. Additionally, Momentum Score of A reflects the short-term attractiveness of this Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Investors interested in the airline space may consider Azul S.A. AZUL and China Southern Airlines Company Limited ZNH, each sporting a Zacks Rank #1.

Azul has trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average being 97.9%. At China Southern, the consensus mark for 2019 earnings has increased more than 29% over the past 60 days.

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United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
 
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