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SkyWest Inc. (SKYW - Free Report) reported excellent second-quarter 2012 financial results in early August, lifting shares of this regional airline operator by more than 56% since the announcement. The quarter included a positive earnings surprise of 230%; its third straight quarterly outperformance.

Earnings estimates have been moving higher, helping SkyWest achieve a Zacks #1 Rank (Strong Buy) on August 21, 2012. A forward P/B multiple of just 0.37 and P/S multiple as low as 0.14 make SkyWest an attractive pick for value investors.

Excellent Q2

On August 8, SkyWest reported second-quarter earnings per share of 33 cents, which surpassed the Zacks Consensus Estimate by 23 cents (230%) and last year’s earnings by 28 cents (560%). Total revenue of a little over $937.2 million increased 0.4% year over year, but lagged the Zacks Consensus Estimate by 0.4%.

The top-line benefited mainly from improvement in on-time, completion and customer service metrics. The bottom-line made a huge jump due to the solid top-line coupled with cost reduction programs initiated by management in 2011.

SkyWest’s Traffic Data for the month of August 2012 reflect that the company’s fundamentals are headed in the right direction. Passenger boarding surged 6.5% year over year to 5,442,243. Revenue passenger miles and available seal miles increased 3.7% and 1.3% year over year, respectively. Load factor increased to 82.7 from 80.8 in August 2011.

Earnings Estimate Revisions Climbing

Estimates for SkyWest have been rising over the last 60 days. The Zacks Consensus Estimate for 2012 moved up 9.7% to 79 cents, while the Zacks Consensus Estimate for 2013 advanced 6.7% to $1.27. These outlooks suggest the potential for enormous year-over-year gains of 364% for 2012 and 59.9% for 2013.

Impressive Valuation

SkyWest shares returned to a growth trajectory in early August. Going forward, there is an untapped potential locked in the stock. This is evidenced by its current forward P/E multiple of 12.44, P/S multiple as low as 0.14, and P/B multiple of just 0.37 (a P/E ratio below 15.0, a P/S ratio below 1.0, and a P/B ratio under 3.0 generally indicate value). Furthermore, SkyWest offers a current dividend yield of 1.7%.

Strong Chart

The widening gap between the stock price line and the estimate lines of 2012 and 2013 indicates that SkyWest is currently undervalued. The company is likely to sustain its positive trend riding on the back of its growing business opportunities, which is reflected in its August 2012 Traffic Data and its recent Capacity Purchase Agreement with American Airlines.

Headquartered in St. George, Utah, SkyWest Inc. was founded in 1972. The company operates regional airlines serving the U.S., Canada, Mexico, and the Caribbean. As of August 2012, SkyWest conducted approximately 4,200 daily departures through a fleet of 725 regional aircrafts. Additionally, the company also offers aircraft leasing services.

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