SkyWest, Inc. (SKYW) has been benefiting from flying contract rate increases, fleet modernization techniques and consistent shareholder-friendly initiatives. The positive sentiment surrounding SKYW stock is evident from the fact that the Zacks Consensus Estimate for the fourth quarter of 2024 and full-year 2024 earnings has been revised upward in the past 90 days.

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The Zacks Consensus Estimate for the fourth quarter and full-year 2024 earnings per share indicates more than 100% growth from the respective 2023 figures.

Let’s delve deeper.

Tailwinds Working in Favor of SKYW Stock

SkyWest's top line benefits from flying contract rate increases. Notably, SKYW’s third-quarter revenues of $912.8 million beat the Zacks Consensus Estimate of $887.5 million and improved 19.1% year over year, owing to flying contract rate increases. Additionally, SKYW had $19 million of deferred revenues during the reported quarter under its flying contracts.

Revenues from flying agreements (contributing 96.7% to the top line) grew 19.1% from the prior-year reported figure of $883.49 million in third-quarter 2024. The airline carried 10.3% more passengers in the reported quarter on a year-over-year basis. Departures were 11.8% more on a year-over-year basis.

SkyWest's fleet-modernization efforts are commendable. In a bid to modernize its fleet, SkyWest has entered into an agreement with Delta.  DAL is anticipated to deliver a solitary E175 to SKYW in 2024. SKYW will be delivering eight more E175s each in 2025 and 2026. SKYW has fleet-related agreements with other heavyweight airlines like United Airlines and Alaska Airlines. United Airlines is scheduled to deliver seven E175 planes in 2025 and eight in 2026. Alaska Airlines is scheduled to deliver one E175 in 2025. By 2026-end, SkyWest is scheduled to operate 278 E175 aircraft.

In February 2024, SkyWest announced that it had acquired a 25% ownership stake in Contour Airlines, a regional carrier. Concurrent with its third-quarter 2024 results, SkyWest also announced that it had inked a deal with United Airlines to place 40 CRJ550s under a multi-year contract. Per the deal, SKYW will purchase 11 used CRJ550s and convert 29 of its CRJ700s to CRJ550s.

We are impressed by SKYW's efforts to reward its shareholders through buybacks. Per the share repurchase program authorized by SKYW’s board of directors in May 2023, SKYW repurchased 217,000 shares of common stock for $16.3 million during third-quarter 2024. As of Sept. 30, 2024, SkyWest had $53 million available under its current share repurchase program.

SKYW’s Price Performance Soars High

SkyWest has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 79.12%. Driven by this upbeat earnings performance and the positives mentioned above, SKYW shares have gained 119.2% so far this year, outperforming its industry.

Additionally, SKYW’s price performance so far this year compares favorably with that of other industry players like JetBlue Airways Corporation JBLU and Alaska Air Group ALK.

YTD Price Performance

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Impressive Valuation Picture for SKYW Stock

From a valuation perspective, SKYW is trading at a discount compared to the industry, based on the price-to-book ratio. The company has a Value Score of A.

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How Should Investors Approach SKYW Stock?

It is understood that SKYW stock is attractively valued, and an increase in flying contracts is contributing to SKYW’s top line. We believe that the positives surrounding the stock (as highlighted throughout the write-up) outweigh the concerns regarding escalating operating expenses and debt-laden balance sheet. We, therefore, suggest investors to add SKYW stock to their portfolios for healthy returns. The company’s Zacks Rank #1 (Strong Buy) further supports our thesis. You can see the complete list of today’s Zacks #1 Rank stocks here.

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