Sky West, Inc. Earnings Analysis: 2015 By the Numbers

Sky West, Inc. reports financial results for the year ended December 31, 2015.

We analyze the earnings along side the following peers of Sky West, Inc. – United Continental Holdings, Inc., Alaska Air Group, Inc., Delta Air Lines, Inc., Hawaiian Holdings, Inc., Southwest Airlines Co., Allegiant Travel Company, American Airlines Group, Inc. and JetBlue Airways Corporation (UAL-US, ALK-US, DAL-US, HA-US, LUV-US, ALGT-US, AAL-US and JBLU-US) that have also reported for this period.

Highlights

  • Gross margins widened from 11.22% to 17.71% compared to the same period last year, operating (EBITDA) margins now 16.12% from 11.10%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 3654.92 3534.37 3297.73 3237.45 3095.56
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings -27.34 51.16 58.96 -24.15 117.82
Earnings Growth (YOY) -128.37 287.15 15.25 -140.97 587.77
Net Margin -0.75 1.45 1.79 -0.75 3.81
EPS -0.52 0.99 1.12 -0.47 2.27
Return on Equity -1.98 3.76 4.18 -1.7 8.11
Return on Assets -0.63 1.2 1.39 -0.56 2.56

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 11.22% to 17.71% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 11.10% to 16.12% compared to the same period last year. For comparison, gross margins were 11.22% and EBITDA margins were 11.10% in the last reporting period.

Gross Margin Versus EBITDA Margin

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

SKYW-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 51.46 days from 81.77 days for the same period last year.

Gross Margin Versus Working Capital Days

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 3.08% to 7.58% and (2) one-time items. The company’s pretax margins are now 6.28% compared to -0.50% for the same period last year.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Sky West, Inc. operates as a holding company for SkyWest Airlines, Inc. and ExpressJet Airlines, Inc., which offers scheduled passenger services in the United States of America, Canada, Mexico and the Caribbean. It operates through two segments: SkyWest Airlines and ExpressJet. The SkyWest Airlines segment provides regional jet and turboprop service to airports primarily located in the Midwestern and western United States. The ExpressJet segment provides regional jet service principally in the United States, primarily from airports located in Atlanta, Cleveland, Chicago, Denver, Houston, Detroit, Memphis, Newark, Minneapolis and Washington Dulles. The company was founded in 1972 and is headquartered in St. George, UT.

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