Why Republic Airways Holdings Inc. Shares Took Off Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Republic Airways Holdings (NASDAQ: RJET  ) have gained 9% today after topping out with a gain of nearly 12% over yesterday's closing price in early afternoon trading. The regional airline reported strong earnings for the first quarter, in spite of (or perhaps due to) thousands of cancellations as a result of inclement weather, and also gave its earnings guidance a major upgrade.

So what: Republic's quarterly operating revenue rose 4% year over year, to reach $337.5 million, while available seat-miles rose 6%, to nearly 3.4 billion. Canceling more than 12,400 flights during the quarter (a 145% increase from the year-ago quarter), primarily because of bad weather, left Republic with a mere 0.7% uptick in quarterly departures, to 103,349; but its earnings nonetheless rose to $0.26 per share, which was well ahead of the $0.17 in EPS expected by analysts.

Republic also updated its full-year guidance, projecting its 2014 revenue in a range of $1.35 to $1.4 billion and its EPS in a range of $1.20 to $1.40, which is quite a bit above the old $0.90 to $1.20 range. Analysts had expected $1.4 billion in annual revenue, but only $1.12 in EPS, so this is a nice surprise to the upside for investors.

Now what: Republic's new estimate would bring 2014's full-year earnings up to a level not touched since the end of the financial crisis, when the airline regularly reported a much higher EPS than it does today. Republic shareholders have waited a long time for the company to return to its pre-recession strength, and today's report is indeed an indication that it's making progress. However, it's worth keeping in mind that Republic's valuation remains elevated above its historical average, and it's possible that investors could be getting ahead of themselves with optimism for a company that operates in a notoriously unprofitable part of the American economy. There could be opportunity here, but do your homework to ensure that your investment doesn't stall out on the runway.

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