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SkyWest (SKYW) Surges 33% YTD: What's Behind the Rally?

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Shares of SkyWest (SKYW - Free Report) have gained 32.8% so far this year compared with the industry's 3.1% growth.

YTD Price Performance

 

Reasons Behind the Impressive Price Performance

SkyWest reported better-than-expected earnings and revenues in the first quarter of 2019. The bottom line also expanded 29% on a year-over-year basis. Notably, the company’s solid top-line performance can be attributed to its improved fleet mix.

SkyWest also has an impressive earnings history, having outshined the Zacks Consensus Estimate in each of the trailing four quarters, the average being 14.4%.

We expect this Zacks Rank#1 (Strong Buy) company to outperform in the second quarter as well. Results in the second quarter are expected to be aided by the carrier's fleet transition efforts among other things. Meanwhile, in a bid to upgrade its fleet, SkyWest has added 39 E175 planes and five CRJ900 aircraft to its fleet, and removed 48 unproductive/less-profitable aircraft since the fourth quarter of 2017. You can see the complete list of today’s Zacks #1 Rank stocks here.

With the U.S. economy improving and consumer confidence remaining strong, more Americans are going for vacations. This apart, a much-improved job market and rising disposable income are an incentive for consumers to opt for air travel.  Moreover, the upcoming summer season is likely to be an extremely busy one for the U.S. carriers like SkyWest. Increased traffic is likely to boost revenues significantly.

Furthermore, the company’s efforts to reward its shareholders through dividends and buybacks are commendable. In February 2019, SkyWest increased its quarterly dividend payment by 20% to 12 cents per share (48 cents annualized). Moreover, its board of directors approved a new share repurchase program worth $250 million.

Other transportation stocks like Southwest Airlines (LUV - Free Report) , Canadian Pacific Railway (CP - Free Report) and Expeditors International of Washington (EXPD - Free Report) also raised dividend payouts this year.

Estimate Revisions & Style Score

Upward estimate revisions reflect optimism over a stock’s prospects. SkyWest scores impressively on this front as well. Over the past 60 days, the Zacks Consensus Estimate for current-year earnings moved 5.4% north, reflecting positive sentiment surrounding the stock. 

Additionally, the stock has an attractive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.

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