SkyWest, Inc. (SKYW) has been benefiting from flying contract rate increases, fleet modernization techniques and consistent shareholder-friendly initiatives. The positive sentiment surrounding SKYW stock is evident from the fact that the Zacks Consensus Estimate for the first and second quarters of 2025 as well as full-year 2025 earnings has been revised upward in the past 90 days.

Moreover, the consensus mark for the first and second quarters of 2025 and full-year 2025  implies growth of 38.6%, 22.5% and 15.9%, respectively, from their corresponding 2024 figures.

Let’s delve deeper.

Tailwinds Working in Favor of SKYW Stock

SkyWest's top line benefits from flying contract rate increases. Notably, SKYW’s fourth-quarter 2024 revenues of $944.4 million beat the Zacks Consensus Estimate of $904 million and improved 26% year over year owing to the flying contract rate increases. During the reported quarter, SKYW had $20 million of deferred revenues under its flying contracts.

Revenues from flying agreements (contributing 96.7% to the top line) grew 25.3% from the prior-year reported figure of $912.8 million. The airline carried 13.2% more passengers in the reported quarter on a year-over-year basis. Departures increased 16.4% on a year-over-year basis. The passenger load factor (percentage of seats filled by passengers) decreased 1.2 points to 82.2%.

SkyWest's fleet modernization efforts to cater to the improvement in travel demand are commendable. In a bid to modernize its fleet, SKYW has fleet-related agreements with airline heavyweights like United Airlines UAL and Alaska Airlines ALK. SKYW will be receving eight more E175s in 2025 and 2026 each. United Airlines is scheduled to deliver seven E175 planes in 2025 and eight in 2026. Alaska Airlines is scheduled to deliver one E175 in 2025. By 2026-end, SkyWest is scheduled to operate 278 E175 aircraft.

In February 2024, SkyWest announced that it has acquired a 25% ownership stake in Contour Airlines, a regional carrier. Concurrent with its third-quarter 2024 results, SkyWest also announced that it has inked a deal with United Airlines to place 40 CRJ550s under a multi-year contract. It also declared a multi-year contract extension with American Airlines AAL, which would allow a total of 74 CRJ700s under the agreement.

We are impressed by SKYW's efforts to reward its shareholders through buybacks. Per its previously announced share repurchase program authorized by SKYW’s board of directors in May 2023, SKYW repurchased 47,000 shares of common stock for $4.9 million during the fourth quarter of 2024. As of Dec. 31, 2024, SkyWest had $48 million available under its current share repurchase program. Buybacks not only reduce the total outstanding share count, thereby increasing earnings per share, but also signal management's belief in the intrinsic value of the stock.

SKYW’s Price Performance Soars High

SkyWest has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 16.71%. Driven by this upbeat earnings performance and the positives mentioned above, SKYW’s shares have gained 57.6% over the past year, outperforming its industry.

One Year Price Performance

Image Source: Zacks Investment Research

Impressive Valuation Picture for SKYW Stock

From a valuation perspective, SKYW is trading at a discount compared to the industry, going by the price-to-book ratio. The company has a Value Score of A.

Image Source: Zacks Investment Research

How Should Investors Approach SKYW Stock?

It is understood that SKYW stock is attractively valued, and an increase in flying contracts is contributing to SKYW’s top line. We believe that the positives surrounding the stock (as highlighted throughout the write-up) outweigh the concerns regarding escalating operating expenses and debt-laden balance sheets. We, therefore, suggest investors to add SKYW stock to their portfolios for healthy returns. The company’s Zacks Rank #1 (Strong Buy) further supports our thesis.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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