On Friday, Deutsche Bank adjusted its outlook on SkyWest (NASDAQ:SKYW), increasing the price target to $116.00 from the previous $101.00, while reaffirming a Buy rating on the stock. The adjustment follows the airline's reported earnings surpassing expectations and a positive forecast for flight hours.
Deutsche Bank's revised estimates for SkyWest's earnings per share (EPS) for the year 2024 have been increased from $6.75 to $7.05, surpassing the Bloomberg consensus mean EPS of $6.89. This revision is attributed to the company's third-quarter earnings outperformance and an optimistic projection for block hour production.
Looking further ahead, the analyst has also elevated the 2025 EPS forecast for SkyWest from $7.40 to $8.25, which is higher than the Bloomberg consensus mean EPS of $7.80. The 2026 EPS projection has similarly been lifted from $8.10 to $8.95, again outpacing the Bloomberg consensus mean EPS of $8.67. The upward revisions for the coming years are based on expectations of a more stable pilot employment environment and enhanced growth prospects.
The positive adjustments in SkyWest's forecasts come in the wake of the company's announcement regarding a significant agreement with United Airlines. Under this new multi-year contract, SkyWest will place 40 CRJ-550 aircraft with United, which is expected to contribute to the regional airline's growth opportunities.
In other recent news, SkyWest has made significant strides in the aviation industry with noteworthy financial and operational developments. The company reported a successful Q2 2024, with a net income of $76 million and revenue of $867 million. SkyWest also expanded its fleet, integrating 8 new United Finance E175s and launching their first CRJ550 and Delta prorate operation.
TD Cowen maintained its Buy rating and $95.00 price target for SkyWest, expressing confidence in the airline's performance. The firm's endorsement comes with a strong belief that SkyWest remains an attractive stock for small to mid-cap value investors. Current schedules indicate an increase in block hours for the Q4 2024 and Q1 2025, which could lead to positive surprises in the management's forward-looking statements.
In meetings with SkyWest's executives, TD Cowen held a positive outlook on the company, recognizing SkyWest's potential for growth and efficiency. The firm emphasized long-term growth drivers, including the optimization of asset utilization and the return of prorate flying in smaller markets.
Looking ahead, SkyWest anticipates an increase in block hours and full fleet utilization by year's end, as well as growth in their charter and prorate operations. The company's executives have outlined strategic plans to enhance service in underserved communities. They also expect a 9% to 11% increase in 2024 block hours compared to the previous year, and the addition of 278 E175s to the fleet by 2026.
InvestingPro Insights
SkyWest's recent performance and future prospects align well with several key metrics and insights from InvestingPro. The company's stock has shown remarkable strength, with a 125.65% price total return over the past year and an 82.38% return year-to-date. This robust performance is reflected in InvestingPro Tips, which highlight that SkyWest is trading near its 52-week high and has demonstrated strong returns over various time frames.
The positive earnings outlook noted by Deutsche Bank is supported by InvestingPro Data, which shows a healthy revenue growth of 10.41% in the last twelve months as of Q2 2024, and an impressive EBITDA growth of 35.24% over the same period. These figures suggest that SkyWest is on a solid growth trajectory, potentially justifying the analyst's increased EPS projections.
Additionally, an InvestingPro Tip indicates that net income is expected to grow this year, aligning with the analyst's optimistic forecasts. The company's P/E ratio of 22.17 (adjusted for the last twelve months as of Q2 2024) suggests that investors are pricing in future growth, which is consistent with the positive outlook presented in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for SkyWest, providing a deeper understanding of the company's financial health and market position.
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