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Strong Liquidity Aids SkyWest (SKYW) Amid Rising Expenses

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We have recently updated a report on SkyWest, Inc. (SKYW - Free Report) .

SkyWest has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of growth.

The stock has inched up 1.8% in the year-to-date period against a 17.5% decline of the industry it belongs to.

Zacks Investment ResearchImage Source: Zacks Investment Research

With air-travel demand improving, SkyWest carried 66% more passengers in the first nine months of 2021 compared with the year-ago period’s level. As a result, the passenger load factor (percentage of seats filled by passengers) expanded 1530 percentage points to 72% in the first nine months of 2021.

SkyWest’s liquidity position is impressive.  The carrier exited the third quarter of 2021 with cash and cash equivalents of $913 million, above its current debt level of $360 million. This implies that the company has enough cash to meet its short-term debt obligations. The total debt-to-capitalization ratio at the end of the third quarter was 0.56, down from 0.57 at the end of second-quarter 2021.

Rising maintenance expenses are a concern for SkyWest. Aircraft maintenance, materials and repairs expenses increased 20.3% year over year in 2020. In the first nine months of 2021, expenses for aircraft maintenance, materials and repairs increased even more (40%). Aircraft fuel cost surged 69.4% in the first nine months of 2021, with oil prices moving north. Due to an increase in the components, total operating costs (up 20.7% in the first nine months of 2021) are escalating and limiting bottom-line growth.

Zacks Rank & Stocks to Consider

SkyWest currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .

The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. Notably, the adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9% a year ago.  

This uptick in adjusted operating ratios is primarily driven by higher revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better. KNX has surged 39% in the past year. Knight-Swift sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and freight market conditions in the United States.

LSTR’s top and the bottom line increased substantially in each quarter from the third quarter of 2020, owing to robust revenues in the primary segment — truck transportation. LSTR has surged 29.6% in the past year. Landstar carries a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW benefits from higher pricing and volumes across most of its service lines. Total revenues jumped 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.

CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has moved up 2.5% in the past year. C.H. Robinson carries a Zacks Rank #2.