SkyWest: Contract Extensions, Strong Balance Sheet, and Deferred Revenue Tailwinds Underpin Buy Rating

Thomas Fitzgerald CFA, an analyst from TD Cowen, maintained the Buy rating on SkyWest. The associated price target remains the same with $122.00.

Thomas Fitzgerald CFA has given his Buy rating due to a combination of factors that highlight both solid current performance and improved forward visibility. SkyWest modestly exceeded earnings expectations despite a temporary drag from the government shutdown, demonstrating resilient profitability. The company has secured extended capacity agreements with United and Delta on a substantial portion of its E175 fleet, which not only supports revenue stability but also improves cash flow as these aircraft become fully paid off. Management continues to see robust demand for regional flying, is adding nine new E175s in 2026, and projects mid‑single‑digit block hour growth, underpinning guidance for fiscal 2026 earnings in the mid‑$11 per share range.

Fitzgerald also points to favorable balance sheet and capital allocation dynamics as support for the Buy recommendation. Net leverage is expected to remain below 2x, and the company still has a sizable $213 million share repurchase authorization, providing potential upside to earnings per share. While there is some risk tied to Canadian aircraft certification and to future volatility when deferred revenue runs off, SkyWest is set to increase quarterly deferred revenue recognition to $20–25 million in 2026, enhancing near‑term reported earnings. Importantly, the recent contract extensions incorporate management’s expectations for maintenance and labor cost trends, mitigating concerns around expense inflation and reinforcing the overall positive risk‑reward profile of the stock.

According to TipRanks, Fitzgerald CFA is a 5-star analyst with an average return of 21.6% and a 69.77% success rate. Fitzgerald CFA covers the Industrials sector, focusing on stocks such as Alaska Air, American Airlines, and Delta Air Lines.