SkyWest (SKYW) Is A Must-Add For Your Portfolio: Here's Why

St. George, Utah-based SkyWest, Inc. (NASDAQ:SKYW) has been performing well of late. Shares of this Zacks Rank #1 (Strong Buy) regional carrier have gained over 12% in the past month.

Strong Q1

SkyWest performed brilliantly in the first quarter of 2016 surpassing expectations on both the fronts. The carrier’s first-quarter earnings of $0.52 per share were ahead of the Zacks Consensus Estimate of $0.25. Earnings also improved approximately 68% from the year-ago figure.

Quarterly revenues of $762 million comfortably beat the Zacks Consensus Estimate of $738 million. SkyWest’s efforts to modernize its fleet by adding new aircraft and removing unprofitable/less profitable ones drove the upbeat results. Naturally the strong earnings report led to the significant appreciation in share price of the carrier.

Estimates on the Upswing

We note that earnings estimates for SkyWest have exhibited a healthy uptrend following strong first-quarter results. Over the last 30 days, the 2016 Zacks Consensus Estimate of earnings has gone up 38 cents to $2.53 per share on the back of upward revisions by 3 analysts. In fact, earnings per share for the current year are projected to grow at an healthy 27.95% over 2015 levels. The Zacks Consensus Estimate for 2017 has jumped 30 cents over the last month to $2.73 per share.

Attractive Valuation

On a price-to-book basis, shares are trading at 0.78x, which indicates that the stock is undervalued as it is less than 1. Moreover, on a price-to-sales basis, shares are trading at 0.40x, a significant discount to the industry average of 0.71x. Moreover, SkyWest currently trades at a forward P/E of 9.28x.

Dividend Hike

Earlier in the month, SkyWest announced a 25% increase in its quarterly dividend payout to 5 cents (annual payout of 20 cents). The new dividend will be paid on Jul 7 to the shareholders of record as on Jun 30.

We believe that the dividend hike not only highlights SkyWest’s commitment to create value for shareholders but also underlines the carrier’s healthy financial condition and business strength. It is evident from past records that SkyWest has a stable dividend payment history. The new dividend will mark the 84th consecutive quarter of dividend payment for SkyWest.

Other Stocks to Consider

Apart from SkyWest, investors interested in the broader transportation space may also consider stocks like Air France-KLM SA (OTC:AFLYY) , Canadian Pacific Railway Ltd. (NYSE:CP) and Grupo Aeroportuario S.A.B. de C.V. (NYSE:PAC) . All the three stocks sport a Zacks Rank #1 (Strong Buy).