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Here's Why Investors Should Retain SkyWest (SKYW) Stock Now
SkyWest, Inc. (SKYW - Free Report) is gaining from increasing air-travel demand and 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 than 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 was above 80% in first-quarter 2023. We expect load factor to be 83.1% in second-quarter 2023.
SkyWest's fleet-modernization efforts are commendable as well. In a bid to update 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.
Management expects two of the remaining four E175s to be delivered in the fourth quarter of 2023, one in 2024 and the last E175 in 2025. This will increase the E175 fleet size at SKYW to 240 by 2025-end.
Key Risk
SkyWest's current ratio at the end of first-quarter 2023 was 1.09, lower than 1.17 at 2022 end. 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).
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, which currently carries a Zacks Rank #2 (Buy), is benefiting from the improved air-travel-demand situation.
For second-quarter and full-year 2023, AAL’s earnings are expected to register 68.4% and 454% growth, respectively, on a year-over-year basis.
Copa Holdings sports a Zacks Rank #1 (Strong Buy) at present. We are encouraged by CPA's focus on its cargo segment. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 418.8% and 48.4% improvements, respectively, on a year-over-year basis.