Sky West, Inc. :SKYW-US: Earnings Analysis: Q3, 2017 By the Numbers : December 1, 2017

Sky West, Inc. reports financial results for the quarter ended September 30, 2017.

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


  • Summary numbers: Revenues of USD 831.94 million, Net Earnings of USD 53.72 million.
  • Gross margins widened from 20.39% to 23.00% compared to the same period last year, operating (EBITDA) margins now 22.41% from 19.70%.
  • 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:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 831.94 809.76 765.42 758.02 799.78
Revenue Growth (%YOY) 4.02 1.05 0.44 0.7 0.73
Earnings (mil) 53.72 50.48 34.79 -270.25 41.32
Earnings Growth (%YOY) 29.99 25.43 28.4 -768.03 13.94
Net Margin (%) 6.46 6.23 4.54 -35.65 5.17
EPS 1.01 0.95 0.65 -5.22 0.79
Return on Equity (%) 3.71 3.61 2.55 -18.17 2.58
Return on Assets (%) 4 3.85 2.71 -20.71 3.21

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Market Share Versus Profits

Revenues History
Earnings History

SKYW-US’s change in revenue this period compared to the same period last year of 4.02% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that SKYW-US is holding onto its market share. Also, for comparison purposes, revenues changed by 2.74% and earnings by 6.42% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 20.39% to 23.00% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 19.70% to 22.41% compared to the same period last year. For comparison, gross margins were 22.45% and EBITDA margins were 21.96% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

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 are now 19.85 days compared to 37.12 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 10.73% to 13.51% and (2) one-time items. The company’s pretax margins are now 10.42% compared to 8.32% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Sky West, Inc. is a holding company, which engages in the provision of scheduled passenger services in the United States of America, Canada, Mexico and the Caribbean. It operates through the following segments: SkyWest Airlines, ExpressJet, and SkyWest Leasing. The SkyWest Airlines segment provides regional jet and turboprop service to airports primarily located in the Midwestern and western United States. The ExpressJet segment offers 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 SkyWest Leasing segment includes revenue attributed from ownership cost earned under the applicable cost and fixed-fee flying contracts. The company was founded in 1972 and is headquartered in St. George, UT.

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