Benzinga - by Zacks, Benzinga Contributor.
For most investors, how much a stock's price changes over time is important. Not only can it impact your investment portfolio, but it can also help you compare investment results across sectors and industries.
Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.
What if you'd invested in SkyWest (NASDAQ: SKYW) ten years ago? It may not have been easy to hold on to SKYW for all that time, but if you did, how much would your investment be worth today?
SkyWest's Business In-Depth
With that in mind, let's take a look at SkyWest's main business drivers.
SkyWest, founded in 1972, is based in St. George, UT and operates as a regional airline in the United States through its subsidiary SkyWest Airlines.
SkyWest is also the holding company of an aircraft leasing company. In January 2019, SkyWest completed the sale of its erstwhile subsidiary, ExpressJet Airlines, to United Airlines joint venture — ManaAir LLC.
SkyWest Airlines offers high-quality regional service to airports located primarily in the Midwestern and Western United States as well as Mexico and Canada. The carrier primarily operates from Chicago (O'Hare), Denver, Houston, Los Angeles, Minneapolis, Phoenix, Salt Lake City, San Francisco and Seattle airports.
Offering scheduled regional airline service under code-share agreements (a deal between airlines allowing them to use each other's codes on flights among other things) with its airline partners, forms the basis of the company's operating model. On a daily basis, SkyWest is responsible for operating more than 2,100 flights to multiple destinations in North America.
SkyWest provides regional operations to its major airline partners under long-term, fixed-fee, code-share agreements. The company has codeshare agreements with key airline players like Delta Air Lines (NYSE: DAL), American Airlines (NASDAQ: AAL), United and Alaska Airlines.
The fixed-fee agreement with these companies obligate the respective major airline partner to refund the amount of fuel costs SkyWest incurs under those agreements.
Under the prorate agreements with Delta, United Airlines, and American Airlines, SkyWest is liable to cover the costs including fuel expenses of operating the concerned flights. Going by historical evidence, these multiple agreements consisting of a mix of fixed-fee and prorate flying arrangements should bolster the company's operating results.
In 2023, 96.5% of the company's operating revenues of $3 billion came from flying agreements. The rest came from airport customer services and others. As of December 31, 2023, SKYW had a total of 485 aircraft in scheduled service or under contract (which includes 237 E175s, 41 CRJ900s, 118 CRJ700s and 89 CRJ200s in its fleet).
Bottom Line
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For SkyWest, if you bought shares a decade ago, you're likely feeling really good about your investment today.
A $1000 investment made in June 2014 would be worth $6,923.47, or a 592.35% gain, as of June 19, 2024, according to our calculations. Investors should note that this return excludes dividends but includes price increases.
In comparison, the S&P 500 gained 180.38% and the price of gold went up 69.74% over the same time frame.
Looking ahead, analysts are expecting more upside for SKYW.
SkyWest's fleet-modernization efforts are commendable. In February, SKYW announced that it has acquired a 25% ownership stake in Contour Airlines, a regional carrier. The Contour deal includes an asset provisioning agreement, per which SKYW will offer CRJ airframes, engines and rotable parts to Contour. By 2026-end, SKYW is scheduled to operate 278 E175 aircraft. SKYW's shareholder-friendly approach is commendable. SKYW repurchased 10.6 million shares for $289 million in 2023. The positive sentiment surrounding the stock is evident from the fact that the Zacks Consensus Estimate for current-year earnings has been revised upwards over the past 60 days. On the flip side, rising operating expenses owing to an increase in employee compensation is likely to weigh on the company's bottom line.
The stock is up 7.08% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 3 higher, for fiscal 2024. The consensus estimate has moved up as well.
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