We recently compiled a list of the 7 Cheap Transportation Stocks to Buy According to Analysts. In this article, we are going to take a look at where SkyWest, Inc. (NASDAQ:SKYW) stands against the other cheap transportation stocks.
The 33rd Annual Study of Logistics and Transportation Trends was posted on Supply Chain Management Review (SCMR) on September 12. It highlighted the growing challenges facing the logistics and transportation industry as market conditions, regulations, and technological advancements evolve.
The study surveyed over 200 industry professionals, of which 85% had 15+ years of experience and 80% held senior positions. The report provides insight into spending trends, strategies, performance, and regulatory impacts.
The study noted a significant decline in private fleet spending, down to 7.23%, while intermodal transport spending reached a decade-high of 6.5%. Larger shippers (sales over $3 billion) generally align with these trends but spend less on small package and less-than-truckload (LTL) services.
All performance metrics tracked in the study saw declines from 2023, with profitability, return on assets, competitive positioning, and revenue growth all down. Customer satisfaction remained high but showed signs of strain.
Talent shortages were a critical issue, especially in mid-level management and low-wage positions. Companies struggle to offer training due to a lack of time and knowledgeable trainers, with only 39% having formal learning programs. While logistics jobs offer stability and growth opportunities, they are perceived to lag in flexibility and benefits.
Growth Despite Challenges
According to Benchmark International, the global freight and logistics market is projected to grow to $18.69 billion by 2026, with a 4.4% annual growth rate. The logistics segment alone is expected to reach $6.55 trillion by 2027, growing at 4.7% per year. The market includes services like transportation, warehousing, consultation, and packaging across several industries such as manufacturing, agriculture, and construction. Asia-Pacific leads the market share, while North America is expected to grow the fastest by 2027.
Some of the most significant drivers of growth include trade agreements, technological advancements, and globalization. Innovations such as AI, blockchain, and GPS have streamlined logistics operations. The surge in e-commerce and online shopping has also fueled demand for efficient delivery systems, especially “last-mile” services, which represent the costliest part of shipping. The rise of the gig economy, where local couriers fulfill deliveries, has helped reduce these costs.
Sustainability is becoming a focus in logistics, with green initiatives offering fuel savings and appealing to eco-conscious consumers. Furthermore, mergers and acquisitions in the trucking and maritime sectors are expected to increase in 2024, which are driven by lower interest rates and advancements in fleet management technologies.
Our Methodology
For this article, we used transportation ETFs to identify nearly 40 stocks. Next, we narrowed our list to 7 stocks with the lowest PE ratios and highest average analyst price target, as of September 20. The PE ratio of all the stocks in our list is lower than 20.
We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A commercial plane flying overhead with a scenic view of the region in the background.
SkyWest, Inc. (NASDAQ:SKYW)
Average Analyst Price Target Upside as of September 20: 19.06%
PE Ratio (FWD) as of September 20: 11.88
Number of Hedge Fund Holders: 28
SkyWest, Inc. (NASDAQ:SKYW) operates as a regional airline in the U.S., managing a diverse portfolio that includes SkyWest Airlines, SkyWest Charter, and SkyWest Leasing. With a fleet of around 500 aircraft, it connects travelers to more than 240 destinations across North America. The airline has established partnerships with major carriers such as United Airlines, Delta Air Lines, American Airlines, and Alaska Airlines, which enables it to serve over 38 million passengers in 2023 alone.
In addition to its scheduled passenger services, the company offers charter options through its SkyWest Charter division, which provides flexible travel solutions for businesses and groups that require tailored flight schedules. Additionally, the company leases aircraft to other operators through SkyWest Leasing, which enhances its revenue potential.
SkyWest (NASDAQ:SKYW) was held by 28 hedge funds in the second quarter and the stakes amounted to $196.217 million. SW Investment Management is the most dominant shareholder of the company and has a position worth $49.242 million as of Q2.
It is one of the cheap transportation stocks to buy according to analysts on our list. The stock has a consensus Buy rating among 4 analysts, and its average price target of $97.50 represents an upside of 19.06% from current levels. Moreover, analysts expect a massive growth of nearly 800% in the company’s EPS growth in 2024.
In the second quarter, the company reported a GAAP EPS of $1.82, which topped expectations by $0.09. Revenue of $867 million jumped 19.4% year-over-year and surpassed estimates by $40.4 million.
Since the start of 2023, SkyWest (NASDAQ:SKYW) has repurchased approximately 10.9 million shares, representing about 21.5% of its outstanding shares, at a total cost of $311 million and an average price of $28.54 per share. It shows that the company is committed to returning value to shareholders. Furthermore, it reduced its debt to $2.8 billion by the end of the second quarter, down from $3 billion at the end of 2023, with plans to pay off over $400 million in debt in 2024.
The company has also made significant strides in modernizing its fleet to boost operational efficiency and improve passenger comfort. By focusing on acquiring newer aircraft with advanced technology and fuel-efficient engines, it is positioning itself for sustainable growth. In Q2 alone, the company received eight of the 20 United Finance E175 aircraft, adding to its ongoing fleet expansion, with 19 more new aircraft set to arrive at the end of the year.
SkyWest (NASDAQ:SKYW) expects to increase its pilot workforce to over 5,000 by year-end, up approximately 1,000 pilots from the end of 2023. The growth in personnel, combined with a favorable captain balance, is expected to lead to a 9% to 11% increase in block hour production during the second half of the year.
Overall SKYW ranks 5th on our list of the cheap transportation stocks to buy according to analysts. While we acknowledge the potential of SKYW as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.