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Why SkyWest Shares Soared 20% Today

By Brian D. Pacampara, CFA - Jul 31, 2015 at 12:26PM

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A strong quarter lifted SkyWest shares on Friday, but will they be able to maintain altitude?

What: Shares of regional airline operator SkyWest (SKYW 0.57%) popped 20% on Friday after its quarterly results blew out Wall Street expectations.

So what: SkyWest shares have been sluggish in recent weeks on growth uncertainty heading into the quarter, but a wide Q2 beat -- EPS of $0.61 on revenue of $788.4 million versus the consensus of $0.27 and $771 million -- is forcing analysts to quickly boost their valuation estimates. Operating expenses even declined by $85 million over the year-ago period, giving investors plenty of good vibes over SkyWest's cost structure and completion rates going forward.

Now what: Given the significant reduction in its fuel costs, I wouldn't expect SkyWest's operating momentum to slow anytime soon. "Our second quarter results reflect meaningful progress in our action plans to secure profitable flying contracts, remove unprofitable aircraft and provide solid operating performance," said President Chip Childs. "These actions are the primary drivers for the strong earnings momentum we are generating. We remain committed to disciplined deployment of capital and resources as we continue the process of optimizing our fleet size and mix." Of course, when you couple the airline industry's notoriously intense nature with SkyWest's suddenly hot stock price, conservative Fools might want to hold out for a wider margin of safety before buying into that bull talk. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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