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Bear of the Day: Skywest (SKYW)

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The cloud of negativity which was weighing down on Wall Street the last couple of weeks feels like it is beginning to dissipate. Looking across the market, I see all sorts of stocks in the green. It is more than just a stock here and there, it’s entire industries which are beginning to rally. That could lead investors into a false sense of security, buying any stock that’s on the move. It is more important now than ever to make sure the stocks you pick have strong underlying earnings trends. That way, if the market does chop around or go deeper into a future correction, you have some downside protection. At the end of the day, it’s all about profits.

One way to make sure the stock you are thinking of buying has a strong earnings trend is by leaning on the Zacks Rank. Stocks which are Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) stocks have strong earnings trends. Stocks with Zacks Rank #4 (Sell) and Zacks Rank #5 (Strong Sell) ranks have weaker earnings trends.

Today’s Bear of the Day is a stock that has fallen out of the good graces of the Zacks Rank. I’m talking about Zacks Rank #5 (Strong Sell) SkyWest (SKYW - Free Report) .

It doesn’t take this article to realize that the airline industry has been suffering. A year ago, SkyWest posted $6.25 EPS. The current year Zacks Consensus Estimate comes in at 46 cents. That’s an earnings contraction of 92.64%. Next year’s number has come down as well. Over the last sixty days, four analysts have cut their earnings estimates for next year. That has dropped the Zacks Consensus Estimate for next year from $4.37 to $3.58. As bad as the 92% contraction for this year sounds, next year’s return to growth should be comforting for investors. The $3.58 represents growth of 677%.

The Airlines industry is in the Bottom 6% of our Zacks Industry Rank. Surprisingly, there are a couple of stocks within the industry that have favorable Zacks Ranks. The two stocks are Zacks Rank #1 (Strong Buy) Alaska Air (ALK - Free Report) and Zacks Rank #2 (Buy) LATM Airlines (LTMAQ - Free Report) .

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SkyWest, Inc. (SKYW) - free report >>

Alaska Air Group, Inc. (ALK) - free report >>

LATAM Airlines Group S.A. (LTMAQ) - free report >>