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SkyWest Inc., so out of favor with Wall Street in the first half of last year, is suddenly hot again.
After losing more than half its value between January and June, the regional airline's stock price has doubled since last August and appears poised to go higher.
Anxiety about atypical losses, the bankruptcies of some SkyWest rivals and whether the regional airline business was no longer viable in an age of rising fuel prices all served to drag down the price of the biggest regional carrier in the U.S. even though the St. George-based parent of SkyWest Airlines and ExpressJet Airlines was universally acknowledged to have the strongest balance sheet in the industry.
When it comes to SkyWest, many of those worries have eased. After losing money in the first and last quarters of 2011 and the first quarter of 2012, the airline is earning money again. It turned the corner in the second quarter of 2012 with a $17 million profit and followed it three months later with a $21 million gain. SkyWest will report fourth quarter results next month.
On Monday, SkyWest closed at $13.66 a share, up 6 cents, or 0.4 percent.
Investors also liked a deal SkyWest struck with one of its key partners, Delta Air Lines. SkyWest has one of the biggest 50-seat regional jet fleets in the world, and with fuel prices at high levels they have become too expensive to fly. The deal called for Delta to provide SkyWest with 34 bigger jets. In return, SkWest agreed to drop 66 of the smaller jets from Delta service. Most were returned to Delta, which owns them. SkyWest is flying the rest for American Airlines at more profit, operating them under the American Eagle brand.
"That caused us to increase our earnings estimate" for SkyWest, James Parker, an airline analysts with Raymond James and Associates in Atlanta, said Monday. "For the full year, we think they will earn 90 cents a share (in 2012) and that that will go up to $1.45 per share in 2013." By contrast, SkyWest lost 52 cents per share, or $27.3 million, in 2011.
According to a consensus estimate of several analysts surveyed by Thompson Reuters, SkyWest should earn 19 cents a share in the fourth quarter, and they agreed with Parker on the yearly performance, forecasting 91 cents.
Raymond James has a "strong buy" recommendation on SkyWest. It thinks the stock has room to move close to $15 a share, which would put it above its last 52-week high of $14.05 last February.
Other analysts aren't so bullish. Helene Becker, with Dahlman Rose and Co. in New York, raised her view of SkyWest last year from "sell" only to "hold," recommending that investors maintain their positions. A hold generally indicates that a stock should perform no better or worse than comparable stocks.
"The [airline] industry in general is having a good year, and I think there's no reason to believe that they wouldn't participate in that," Becker said. She declined to speculate how high the stock may go.
Who is buying up SkyWest's shares isn't clear. Neither Parker nor Becker would speculate, although Becker noted that one of the buyers is probably SkyWest itself. In September, the airline announced details of its latest stock repurchase program. It will buy up to 6.5 million shares on the open market or in privately negotiated deals from time to time.
"Obviously, they believe in it because they continue to support their own stock. A lot of investors look for that," Becker said.