SkyWest Inc. (SKYW) has been streamlining their business for the past several quarters, and the decisions have begun to payoff, as seen in their most recent earnings announcement. In their Q2 earnings announcement, the company posted their best quarterly operating income since 2008. Management saw improved operating performance, increased flying contracts, reduced the number of aircraft flying under unprofitable contracts, and improved profitability. Further, management has been able to increase cash (+$54 million from the end of Q1), and acquired 9 E175 aircrafts including engines and spare parts. Also, during the quarter, management was able to repurchase 1.25 million shares of common stock for $18.7 million. Due to these factors, SkyWest has become the Zacks Bull of the Day.
This Zacks Rank #1 (Strong Buy) company operates a regional airline in the United States. It provides scheduled passenger and air freight services with approximately 3,500 total daily departures to various destinations in the United States, Canada, Mexico, and the Caribbean. The company operates its flights as Delta Connection, United Express, US Airways Express, American Eagle, or Alaska under code-share arrangements. As of June 30, 2015, it operated a fleet of 676 aircraft. It also offers regional jet and turboprop service to airports; and ground handling services for other airlines throughout its system.
According to President Chip Childs, “Our second quarter results reflect meaningful progress in our action plans to secure profitable flying contracts, remove unprofitable aircraft and provide solid operating performance. These actions are the primary drivers for the strong earnings momentum we are generating. We remain committed to disciplined deployment of capital and resources as we continue the process of optimizing our fleet size and mix.”
Increasing Estimates
Specifically, over the past four quarters, SkyWest has beaten the Zacks Consensus Estimate, and has posted an average positive earnings surprise of 338.05%! Further, the current Zacks Consensus Estimate for Q3 15 indicates a 20% y/y growth in EPS.
The graph below shows SkyWest’s Price and EPS Surprise over the past several years. As you can see the past four consecutive quarters SkyWest has seen positive earnings beats, and subsequent price appreciation.
Over the past 30 days, EPS estimates have risen for Q3 15, FY 15, and FY16; Q3 15 improved form $0.52 to $0.60, FY 15 rose from $1.29 to $1.44, and FY 16 jumped from $1.38 to $1.52.
Bottom Line
With persistently low fuel prices, strong operating income, improving net income, and a strong stock buyback program SkyWest is accomplishing all the goals management set out a few quarters back. Also, management has improved operations, cut extraneous costs, and won improved contracts. This company looks to be flying high into 2016.
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