Does SkyWest's Lower Valuation Indicate a Buying Opportunity?

SkyWest, Inc. (SKYW) looks cheap from a valuation standpoint. Considering the trailing 12-month price-to-book (P/B)ratio, SkyWest is trading at a discount compared to the industry.

The stock has a trailing 12-month P/B-TTM of 1.46X compared with 2.85X for the industry over the past five years. These factors indicate that the stock’s valuation is attractive. SKYW has a Value Score of A.

SKYW P/B Ratio (Trailing 12 months) Vs. Industry

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Now, the question is whether it is worth buying, holding, or selling the SkyWest stock at current prices. Let us delve deeper to find out.

Tailwinds Working in Favor of SkyWest Stock

SkyWest's top line benefits from flying contract rate increases. As of June 30, 2026, SkyWest had cumulative deferred revenues of $213.82 million under its flying contracts. Revenues from flying agreements (contributing 96.5% to the top line) grew 7.2% year over year during the first six months of 2026. Departures increased 1.7% on a year-over-year basis in the first six months of 2026.

SkyWest's fleet-modernization efforts to cater to the improvement in travel demand are commendable. In a bid to modernize its fleet, SKYW has fleet-related agreements with airline heavyweights like United Airlines UAL and Delta Air Lines DAL.

Concurrent with its second-quarter 2026 results, SkyWest announced that it has inked a deal to purchase and operate 11 new E175 aircraft under a multi-year flying contract for American Airlines AAL. The 11 new E175 aircraft are anticipated to replace 11 CRJ700s SkyWest is currently flying under contract with American Airlines. SKYW is scheduled to purchase the 11 E175s from Embraer with anticipated delivery dates in 2026 and 2027.

Further, UAL is scheduled to deliver eight E175 planes in 2026. Alaska Airlines is expected to deliver one E175 in 2026. DAL is likely to deliver 10 E175 planes in 2027 and six in 2028.  By 2027-end, SkyWest anticipates having nearly 300 E175 aircraft in its fleet.

As previously announced, SkyWest entered into a purchase agreement with Embraer, which secures delivery positions for 33 additional E175s from 2028 through 2032 for potential future flying opportunities. SkyWest also secured purchase rights on 50 additional E175s from Embraer.

SkyWest’s long-term debt level has decreased to $1.64 billion at the end of second-quarter 2026 from $2.00 billion at the end of second-quarter 2025. This is a positive indicator for SKYW's prospects as debt reduction implies a decrease in total liabilities on the company's balance sheet, which is likely to strengthen solvency and improve financial leverage ratios.

Long-Term Debt to Capitalization

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SKYW’s continued efforts of share repurchases reflect a disciplined capital-allocation policy. As a reflection of its shareholder-friendly stance, during the first half of 2026, SkyWest repurchased 1.6 million shares for $150 million. As of June 30, 2026, SkyWest had almost $63 million available under its current share repurchase program. Concurrent with its second-quarter earnings release, SKYW’s board of directors approved a $250 million increase to the existing stock repurchase program. Buybacks not only reduce the total outstanding share count, thereby increasing earnings per share, but also signal management's belief in the intrinsic value of the stock.

What Do Earnings Estimates Say for SkyWest?

The positive sentiment surrounding SkyWest stock is evident from the fact that the Zacks Consensus Estimate for the third quarter of 2026 and the fourth quarter of 2026 earnings has been revised northward in the past 60 days. The consensus mark for 2026 and 2027 earnings has also been projected upward in the past 60 days.

The favorable estimate revisions indicate brokers’ confidence in the stock.

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Headwinds Weighing on SkyWest Stock

SkyWest's bottom line continues to be weighed down by a rise in operating expenses. The upside is due to an increase in employee compensation, which includes higher labor pay scales, increased maintenance, as well as costs related to aircraft maintenance, materials and repair, higher production and higher pilot training costs. SkyWest witnessed a consistent increase in operating expenses from $2.82 billion in 2022 to $2.83 billion in 2023, to $3.03 billion in 2024, to $3.44 billion in 2025. In second-quarter 2026, operating expenses were $947 million, up 9% year over year, owing to an expected rise in incremental direct operating costs associated with increased production in the reported quarter and a rise in the fuel cost per gallon.

Macroeconomic uncertainty and pilot shortages continue to plague regional carriers like SkyWest. The competition from larger airlines exacerbates the shortage of qualified pilots for regional carriers. This shortage limits the number of flights regional airlines can operate and can lead to increased operating costs due to the need to offer competitive salaries and benefits. 

Stock prices of regional airline companies are notoriously volatile. As such, shares of SKYW may not be suitable for investors who are not comfortable with often substantial day-to-day volatility. 

Not an Opportune Time to Buy SkyWest Stock

Apart from being attractively valued at present, SkyWest's fleet-modernization efforts remain commendable. In a bid to modernize its fleet, SKYW has fleet-related agreements with airline heavyweights like United Airlines, Delta Air Lines, American Airlines and Alaska Airlines. By 2027-end, SKYW is scheduled to have nearly 300 E175 aircraft. SKYW’s consistent efforts to reward shareholders with share repurchases should boost investor confidence and positively impact the bottom line.

Despite these positives, we advise investors not to buy SKYW stock now, as it continues to be hurt by a consistent rise in operating expenses. The macroeconomic uncertainty and pilot shortages are also hurting SKYW's prospects. Share price volatility continues to be a cause for worry. Considering all these factors, we advise investors to wait for a better entry point and not buy SKYW now. For those who already own the stock, it will be prudent to stay invested. The company’s current Zacks Rank #3 (Hold) justifies our analysis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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