When I last checked in on SkyWest ( SKYW ) in August, I was pretty upbeat about the stock and called it a Buy at $111. Since then, the share price has taken a real hit; it’sWith over 15 years of experience in the markets and a degree in economics, I focus on breaking down companies with clarity and discipline. My goal is to give individual investors a straightforward, honest view—what’s working, what isn’t, and where the risks and opportunities actually are. I don’t chase narratives. I follow the numbers an ...

Core Insights - Investors prioritize companies with consistent profitability, measured effectively by net profit margin, which reflects operational efficiency and management quality [1][2] Profitability Metrics - Net profit margin is calculated as Net profit divided by Sales multiplied by 100, indicating a company's ability to convert sales into profits [2] - A strong net profit margin suggests effective cost control and operational strength, essential for rewarding stakeholders and attracting investors [2] Industry Comparisons - Net profit margin varies across industries, complicating direct comparisons; it is crucial for traditional sectors but may be less relevant for technology firms [3] - Differences in accounting practices, particularly regarding non-cash expenses, further complicate comparisons [4] Investment Strategy - A healthy net profit margin and solid EPS growth are key elements sought in a business model, supplemented by additional criteria for maximizing returns [5] Screening Parameters - Criteria for screening include a net margin of at least 0%, positive percentage change in EPS, high broker ratings, and a favorable Zacks Rank [6] - Stocks with a VGM Score of A or B combined with a Zacks Rank of 1 or 2 are identified as having the best upside potential [7] Company Highlights - **SkyWest, Inc. (SKYW)**: Operates as a regional airline with a Zacks Rank of 1 and a VGM Score of A; 2025 earnings estimate revised upward by 3.8% to $10.33 per share [8] - **Interface, Inc. (TILE)**: Largest manufacturer of modular carpets, also holds a Zacks Rank of 1 and a VGM Score of A; 2025 earnings estimate revised to $1.85 per share from $1.70 [9] - **FreightCar America, Inc. (RAIL)**: Specializes in manufacturing railroad freight cars, currently has a Zacks Rank of 2 and a VGM Score of A; earnings estimate remained unchanged [10][11] - **Standard Motor Products, Inc. (SMP)**: Leading manufacturer of automotive replacement parts, holds a Zacks Rank of 2 and a VGM Score of A; 2025 earnings estimate revised upward by $0.04 to $3.80 per share [12][13]

Core Viewpoint - SkyWest (SKYW) shows potential for significant upside, with a mean price target of $133.6 indicating a 35.5% increase from the current price of $98.6 [1] Price Targets - The average price target consists of five estimates ranging from a low of $126.00 to a high of $150.00, with a standard deviation of $9.42, suggesting a consensus among analysts [2] - The lowest estimate indicates a 27.8% increase, while the highest suggests a 52.1% upside [2] Analyst Sentiment - Analysts have shown increasing optimism regarding SkyWest's earnings prospects, as evidenced by a strong agreement in revising EPS estimates higher [11] - Over the last 30 days, three estimates have been revised upward, leading to a 3.9% increase in the Zacks Consensus Estimate [12] Zacks Rank - SkyWest currently holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors [13] Conclusion on Price Movement - While the consensus price target may not be a reliable indicator of the extent of potential gains, it does provide a useful guide for the direction of price movement [14]

Core Insights - SkyWest, Inc. (SKYW) reported strong third-quarter 2025 results, with earnings per share (EPS) of $2.81 exceeding the Zacks Consensus Estimate of $2.56, marking a 30% year-over-year increase. Revenues reached $1.05 billion, surpassing the Zacks Consensus Estimate of $1.01 billion and reflecting a 15% year-over-year growth [1][7]. Financial Performance - Revenues from flying agreements, which accounted for 96.3% of total revenues, increased by 14.5% compared to the previous year's figure of $1.01 billion. The airline experienced a 10.5% rise in passenger numbers and a 12.4% increase in departures year-over-year. The passenger load factor improved by 0.3 points to 84% [2]. - Operating expenses rose to $876 million, a 12% increase year-over-year, primarily due to higher block hour production, although this was partially offset by operational efficiencies. Cash and marketable securities stood at $753.35 million, up from $727.02 million in the prior quarter, while long-term debt decreased to $1.86 billion from $2.01 billion [5]. Strategic Developments - SkyWest extended its multi-year contract with United Airlines for up to 40 CRJ200 aircraft, indicating a positive outlook on regional flying opportunities. The company plans to expand its E175 fleet to nearly 300 aircraft by the end of 2028, with a purchase agreement for 44 additional E175s secured for delivery from 2028 to 2032 [3][4]. - During the third quarter, SkyWest repurchased 244,000 shares for $26.6 million, with $240 million remaining under its current share repurchase program. Capital expenditures for the quarter totaled $122 million, which included purchases of spare CRJ airframes and parts [6].

Core Viewpoint - SkyWest (SKYW) has received an upgrade to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, indicating a positive earnings outlook that could lead to increased stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, suggesting that rising earnings estimates can lead to buying pressure and higher stock prices [4][5]. - For the fiscal year ending December 2025, SkyWest is expected to earn $10.33 per share, with a 3.9% increase in the Zacks Consensus Estimate over the past three months [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988, indicating a strong track record for this rating [7]. - The upgrade of SkyWest to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [10].

Core Insights - Five stocks have been added to the Zacks Rank 1 (Strong Buy) List, indicating strong potential for investment returns Group 1: Stocks and Earnings Estimates - TAL Education Group (TAL) has seen a 5.1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Flex Ltd. (FLEX) has experienced a 4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Norwegian Cruise Line Holdings Ltd. (NCLH) has had a 3.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - SkyWest, Inc. (SKYW) has seen a 3.8% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Mitsui & Co., Ltd. (MITSY) has experienced a 3.6% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2]

Financial Performance - Total operating revenues for the three months ended September 30, 2025, were $1.1 billion, a 15.0% increase from $912.8 million for the same period in 2024[113]. - Net income for the three months ended September 30, 2025, was $116.4 million, or $2.81 per diluted share, compared to $89.7 million, or $2.16 per diluted share, for the same period in 2024[113]. - Total operating revenues rose by 15.0% to $1,050,029 thousand for the three months ended September 30, 2025, from $912,786 thousand in 2024[124]. - Operating revenues rose by 17.4% to $3,033,711 thousand for the nine months ended September 30, 2025, up from $2,583,518 thousand in 2024[145]. - Net income for the nine months ended September 30, 2025, was $337.2 million, or $8.14 per diluted share, compared to $225.6 million, or $5.44 per diluted share, in 2024[165]. Operational Metrics - The number of aircraft in scheduled service or under contract increased from 484 as of September 30, 2024, to 498 as of September 30, 2025, representing a 2.9% increase[114]. - Block hours increased from 334,459 for the three months ended September 30, 2024, to 384,247 for the same period in 2025, a 14.9% increase[114]. - Departures increased from 201,397 for the three months ended September 30, 2024, to 226,305 for the same period in 2025, a 12.4% increase[118]. - The number of passengers carried increased by 10.5% to 12,446,270 for the three months ended September 30, 2025, compared to 11,263,322 in 2024[123]. - The number of passengers carried grew by 12.3% to 34,929,392 for the nine months ended September 30, 2025, compared to 31,103,792 in 2024[144]. Revenue Sources - Capacity purchase revenue increased by $83.5 million, or 11.0%, for the three months ended September 30, 2025, primarily due to an increase in completed block hours[115]. - Prorate and SWC revenue increased by $44.3 million, or 36.1%, for the three months ended September 30, 2025, compared to the same period in 2024[115]. - Capacity purchase agreements flight operations revenue increased by 7.7% to $672,559 thousand for the three months ended September 30, 2025, compared to $624,342 thousand in 2024[125]. - Capacity purchase agreements flight operations revenue increased by 13.1% to $1,994,660 thousand, driven by higher block hour production[148]. Expenses - Total operating expenses increased by $94.5 million, or 12.1%, for the three months ended September 30, 2025, compared to the same period in 2024[116]. - Operating expenses increased by 12.1% to $875,886 thousand for the three months ended September 30, 2025, compared to $781,351 thousand in 2024[132]. - Aircraft maintenance expenses rose by 36.5% to $247,978 thousand for the three months ended September 30, 2025, from $181,652 thousand in 2024[134]. - Aircraft maintenance expenses rose by 36.4% to $695,963 thousand, primarily due to increased maintenance activity[154]. - Salaries, wages, and benefits for SkyWest Airlines and SWC increased by $14.2 million, or 3.8%, from $376.8 million in Q3 2024 to $391.0 million in Q3 2025[173]. Cash Flow and Debt - As of September 30, 2025, the company had $753.4 million in cash and cash equivalents, a decrease of $48.2 million from $801.6 million as of December 31, 2024[194]. - Net cash provided by operating activities increased by 39.9% to $708.9 million for the nine months ended September 30, 2025, compared to $506.6 million for the same period in 2024[197]. - Cash used in investing activities surged by 336.3% to $519.2 million for the nine months ended September 30, 2025, compared to $119.0 million for the same period in 2024[197]. - Long-term debt as of September 30, 2025, was $2.4 billion, with an average effective interest rate of approximately 4.3%[210]. Future Commitments - The company plans to add a total of 13 new E175 aircraft with United between Q4 2025 and the end of 2026[109]. - The company has a firm purchase commitment for 74 new E175 aircraft from Embraer, with delivery dates anticipated into 2032[207]. - The company intends to finance the firm purchase commitment for 74 E175 aircraft with approximately 75-85% debt and the remaining balance with cash[208].

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Core Viewpoint - SkyWest (SKYW) reported quarterly earnings of $2.81 per share, exceeding the Zacks Consensus Estimate of $2.56 per share, and showing an increase from $2.16 per share a year ago, indicating a positive earnings surprise of +9.77% [1][2] Financial Performance - SkyWest's revenues for the quarter ended September 2025 were $1.05 billion, surpassing the Zacks Consensus Estimate by 3.52%, and up from $912.79 million year-over-year [2] - The company has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Stock Performance and Outlook - SkyWest shares have declined approximately 3.5% since the beginning of the year, contrasting with the S&P 500's gain of 17.2% [3] - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $2.25 for the upcoming quarter and $9.95 for the current fiscal year [4][7] Industry Context - The Transportation - Airline industry, to which SkyWest belongs, is currently ranked in the bottom 37% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and earnings estimate revisions, which could impact SkyWest's stock performance [5]

Financial Data and Key Metrics Changes - SkyWest reported net income of $116 million, or $2.81 per diluted share for Q3 2025, reflecting a strong demand for its services [4] - Total Q3 revenue was $1.1 billion, up 15% from $913 million in Q3 2024, and up from $1 billion in Q2 2025 [9] - Q3 pre-tax income was $157 million, with an effective tax rate of 26% [9][10] - Cash at the end of Q3 was $753 million, up from $727 million in the previous quarter but down from $836 million in Q3 2024 [10] - Free cash flow generated in the first three quarters of 2025 was nearly $400 million, including $144 million in Q3 [11] Business Line Data and Key Metrics Changes - Contract revenue for Q3 was $844 million, slightly up from $842 million in Q2 2025 and significantly up from $761 million in Q3 2024 [9] - Pro-rate and charter revenue was $167 million in Q3, up from $145 million in Q2 and $123 million in Q3 2024 [9] - Leasing and other revenue was $39 million in Q3, down from $48 million in Q2 but up from $29 million in Q3 2024 [9] Market Data and Key Metrics Changes - SkyWest achieved over 185 days of 100% controllable completion year-to-date through Q3 2025, with over 2,500 daily scheduled departures [4] - Q3 block hours were up 2% compared to Q2 2025, with a projected 4% decrease in Q4 due to seasonality [19] Company Strategy and Development Direction - The company aims to restore or bring new service to underserved communities, redeploy its existing fleet, and prepare for future aircraft deliveries [8] - SkyWest plans to acquire and finance 30 additional E175s by the end of 2028 and repay approximately $500 million in debt in 2025 [12] - The company is focused on enhancing its fleet flexibility and maintaining strong partnerships to meet market demands [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in 2026, including increased service to underserved communities and strong demand for pro-rate products [15] - The company is committed to navigating challenges posed by the federal government shutdown while honoring service commitments [5][27] - Management anticipates low single-digit percentage growth in block hours for 2026, translating into mid to high single-digit percentage growth in EPS [13][20] Other Important Information - The Department of Transportation finalized SkyWest Charter's commuter authorization, which is expected to provide future opportunities [5] - The company has secured firm delivery positions for 44 more E175s from 2028 to 2032, enhancing fleet flexibility [6] Q&A Session Summary Question: Can you walk us through the fleet and mixed benefit as you bring on more E175s? - Management noted that they expect to transition additional CRJ-550s into service and have strong pro-rate demand, which will offset some of the Delta-owned CRJ-900s being returned [23][24] Question: What is the status of Essential Air Service funding? - Management indicated that funding is secured through November 18, and they are committed to serving communities despite uncertainties regarding future reimbursements [26][27] Question: Can you clarify the multi-year agreement with United regarding CRJ-200s? - Management confirmed that the extended CRJ-200s are all contract airplanes, enhancing their partnership with United [28][29] Question: What is the impact of the 10% tariff from Brazil? - Management acknowledged the tariff's impact on small community service but emphasized their commitment to evolving and executing their strategy [34][35] Question: What are the net fleet additions expected for 2026? - Management projected flat to small increases in capacity purchase flying for 2026, with 20 CRJ-550s and 11 E175s being added, offset by the return of Delta-owned aircraft [38]