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Here's Why Investors Should Retain SkyWest (SKYW) Stock Now
SkyWest, Inc. (SKYW - Free Report) is benefiting from its rising air-travel demand as well as fleet-modernization efforts. However, low liquidity is a headwind.
Factors Favoring SKYW
With improvement in air-travel demand, SkyWest carried 9.4% more passengers in 2022 compared with the year-ago level. As a result, passenger load factor (percentage of seats filled by passengers) expanded 8.8 percentage points to 83.4% in 2022. With air-travel demand continuing to improve, load factor is likely to be impressive in first-quarter 2023 as well.
SkyWest's fleet-modernization efforts are commendable as well. In a bid to modernize its fleet, SkyWest entered into an agreement with Delta to purchase and operate 16 new E175 aircraft in August.
Seven planes were delivered in third-quarter 2022. Four were delivered in fourth-quarter 2022. Two aircraft are expected to get delivered in 2023 and one in 2024. SkyWest has agreements with most other leading airlines as well.
Key Risk
SkyWest's current ratio at the end of 2022 was 1.17, marginally above 1. Such a low current ratio does not bode well as it implies that the company may have problems in meeting its short-term debt obligations.
Zacks Rank & Key Picks
SkyWest currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Transportation sector are American Airlines (AAL - Free Report) and Copa Holdings, S.A. (CPA - Free Report) .
American Airlines, currently carrying a Zacks Rank #2 (Buy), is benefiting from the improved air-travel-demand situation. In the fourth quarter of 2022, AAL reported earnings of $1.17 per share, surpassing the Zacks Consensus Estimate by 2.63%.
For first-quarter and full-year 2023, AAL’s earnings are expected to register 100.4% and 332% growth, respectively, on a year-over-year basis.
Copa Holdings sports a Zacks Rank #1 at present. We are encouraged by CPA's focus on its cargo segment.
For first-quarter and full-year 2023, CPA’s earnings are expected to register 302.9% and 40.8% growth, respectively, on a year-over-year basis.