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SkyWest (SKYW) Hurt by Low Travel Demand & High Expenses

We recently issued an updated report on SkyWest, Inc. SKYW.

The company, like other carriers, is bearing the brunt of plummeting air-travel demand due to the COVID-19 pandemic.  Consequently,  the company reported lower-than-expected earnings per share in first-quarter 2020. Additionally, passenger load factor (percentage of seats filled by passengers) deteriorated 11.1 percentage points to 67.5% in the March-end quarter due to the outbreak.

Increase in total operating expenses presents a further challenge to the company. Notably, operating costs increased 5.8% in the first quarter due to higher aircraft maintenance, materials and repairs as well as depreciation and amortization costs. With the crisis showing no signs of subsiding, the company expects the same to dent its performance further in the remainder of 2020.

 

Moreover, SkyWest’s fleet modernization plans may get hampered by the lackluster air-travel demand. However, the company is working on fleet solutions with major airline partners to tide over this unprecedented crisis. The carrier,, which has an agreement with American Airlines AAL for 20 new E175 planes, is in talks to announce new delivery dates. The new E175 planes were originally scheduled to be delivered by 2021.

However, SkyWest’s strong liquidity position looks impressive.  The carrier exited the first quarter with cash and equivalents worth $578 million compared with $520 million at the end of fourth quarter-2019. Notably, the cash balance at the end of the March quarter is higher than the current debt burden of $453.2 million. This implies that the company has sufficient cash to finance its debt burden. Moreover, the company expects to receive nearly $438 million under the CARES Act and buoy its liquidity further.

Zacks Rank & Stocks to Consider

SkyWest currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the Zacks Transportation sector are Scorpio Tankers Inc. STNG and Teekay Tankers Ltd. TNK , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for  The Scorpio Tankers’ current-year earnings has been revised upward in excess of 100% in the past 60 days.

The Teekay Tankers stock has seen the Zacks consensus estimate for current year earnings being revised upwards by 53% in the past 60 days.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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American Airlines Group Inc. (AAL): Free Stock Analysis Report
 
SkyWest, Inc. (SKYW): Free Stock Analysis Report
 
Teekay Tankers Ltd. (TNK): Free Stock Analysis Report
 
Scorpio Tankers Inc. (STNG): Free Stock Analysis Report
 
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