Governments worldwide have reinstated lockdown and social distancing measures to limit the spread of the highly transmissible COVID-19 Delta variant. Nevertheless, most airline operators have been witnessing solid leisure travel demand of late.
Several airlines have been hiring pilots and other workers to meet a surge in demand. In addition, the Transportation Security Administration (TSA) is screening roughly two million passengers per day at airports. Furthermore, as more people get vaccinated, airline companies should continue witnessing increasing demand for their services.
Given this backdrop, we think it could be wise to bet on fundamentally sound airline companies Alaska Air Group, Inc. (ALK) and SkyWest, Inc. (SKYW). These two stocks look like bargains at their current prices, considering their immense growth potential.
Alaska Air Group, Inc. (ALK)
ALK provides passenger and cargo air transportation services. The Seattle, Wash.-based company operates through three segments: Mainline; Regional; and Horizon. It flies to roughly 115 destinations across the United States and North America.
On June 29, 2021, ALK launched a codeshare agreement with Qatar Airways that further strengthens the partnership between the two airlines and provides travelers with exciting and convenient options. The agreement is expected to expand ALK’s global connectivity.
The company’s operating revenues surged 263% year-over-year to $1.53 billion for the second quarter, ended June 30, 2021. ALK’s operating income came in at $549 million, versus a $288 million operating loss in the prior-year period. Its net income was $397 million compared to a $214 million net loss in the year-ago period. Also, its EPS was $3.15 compared versus a $1.74 loss per share in the previous year.
Analysts expect ALK’s EPS to be $4.85 in its fiscal year 2022, representing a 261.1% year-over-year increase. It surpassed the Street’s EPS estimates in three of the trailing four quarters. In addition, the company’s revenue is expected to increase 159.8% year-over-year to $1.82 billion for the quarter ending September 30, 2021. Over the past year, the stock has gained 61% to close yesterday’s trading session at $55.24.
ALK’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It has a B grade for Growth, Momentum, Sentiment, and Quality.
Click here to see the additional POWR Ratings for ALK (Stability and Value). ALK is ranked #3 of 30 stocks in the Airlines industry.
SkyWest, Inc. (SKYW)
SKYW operates a regional airline in the United States. The company operates through two segments: SkyWest Airlines and SkyWest Leasing. It also leases regional jet aircraft and spare engines to third parties and provides airport customer and ground handling services for other airlines. SKYW is based in St. George, Utah.
On May 12, 2021, SKYW agreed with Alaska Airlines to purchase and operate eight E175 aircraft under a 12-year capacity purchase agreement. Chip Childs, the company’s President and CEO, said, “We are pleased to add these new E175s as we help lead the recovery and continue strengthening our Alaska partnership.”
SKYW’s operating revenues surged 87.7% year-over-year to $656.99 million for its fiscal second quarter, ended June 30, 2021. The company’s operating income came in at $115.02 million, versus a $4.40 million operating loss in the prior year. Its net income came in at $61.99 million compared to a $25.71 million net loss in the year-ago period. SKYW’s EPS was $1.22 versus a $0.51 loss per share in the prior-year quarter.
For its fiscal year 2021, analysts expect SKYW’s EPS to be $1.69, representing a 1,094.1% year-over-year increase. In addition, the company’s revenue is expected to increase 52.7% year-over-year to $678.30 million for the quarter ending September 30, 2021. Over the past year, the stock has gained 42.6% to close yesterday’s trading session at $39.27.
SKYW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. In addition, it has an A grade for Sentiment, and a B grade for Growth, Value, Momentum, and Quality.
Click here to access SKYW’s ratings for Stability as well. Again, SKYW is ranked #1 in the Airlines industry.
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ALK shares were trading at $57.12 per share on Thursday afternoon, up $1.88 (+3.40%). Year-to-date, ALK has gained 9.85%, versus a 18.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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