SkyWest is the IBD Stock Of The Day for Tuesday. Shares broke out past a buy point ahead of its earnings report on Jan. 30.
Analysts expect SkyWest earnings will soar 327% to $1.79 per share from 42 cents last year. Revenue is seen jumping almost 22% to $916 million. That would be the third straight quarter of triple-digit EPS growth and the best revenue gain in years.
Evercore ISI on Jan. 8 noted that postelection demand has picked up "quicker and stronger vs. initial expectations," according to a research note reported by The Fly. Meanwhile, the compressed period between Thanksgiving and peak holiday travel, combined with a dose of late-year corporate travel, should contribute to stronger outcomes, the firm said. Evercore lifted its price target on SkyWest to 100 from 85 and kept an in-line rating on the shares.
Raymond James at the end of December also bumped up its targets for airline stocks, noting that financial ratios are improving as applied multiples increase amid the shift to the 2025 fiscal period. The firm lifted its price target on SKYW stock to 120 from 114 and maintained an outperform rating on the shares.
Airlines Outlook Strong For 2025
Meanwhile, analysts widely expect a strong 2025 for airline and travel stocks. Supply has been rebalancing with demand in the wake of the coronavirus pandemic, while consumers still have spending money for vacations. There also appear to be rising opportunities in managed corporate travel demand, while fuel prices have been manageable, TD Cowen analyst Tom Fitzgerald told IBD in December.
However, larger carriers have a more favorable outlook as discount and regional airlines taper capacity and introduce more premium offerings. Discount carriers generally have more work to do in terms of balancing prices and reducing costs as well.
Elsewhere, SkyWest during its Q3 earnings call reported that it is still seeing "significant demand" for many regional routes. The company noted business-class demand outpaced capacity growth in the first half.
But triple-digit earnings growth is seen slowing in 2025 as it runs up against difficult year-ago comparisons. Analysts expect 28% earnings growth in its Q1 report, followed by a 30% earnings increase in Q2 and 16% in Q3. FactSet predicts revenue growth to slow from a 15% gain in Q1 to 7% growth in Q3.
Delta Air Lines on Jan. 10 topped Q4 estimates with earnings of $1.85 per share adjusted on almost 10% revenue growth to $15.56 billion.
United Airlines rose late Tuesday on strong earnings. American Airlines is due Thursday.
SkyWest Stock Clears Buy Point
SkyWest stock on Tuesday rose 5% to 114.80, briefly topping a 113.04 buy point for a seven-week cup-with-handle base.
The current buy zone, which stretches 5% beyond the buy point, extends to 118.69.
Shares are holding above their key moving averages, even as SKYW eased from its record high of 117.51 on Nov. 27.
SkyWest is up nearly 15%% so far this year.
Delta stock rose 3.8% Tuesday. United Airlines gained 2.9%, adding more overnight. American Airlines stock advanced 2%.
The Transportation-Airline group ranks second out of 197 industries tracked by IBD.
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