With a salute to the wishes of shareholders, SkyWest Inc. on Monday said its board of directors has authorized the regional airline to buy back up to 5 million shares of its under-loved stock.
The buyback is on top of another 1.51 million shares already authorized under SkyWest’s existing stock repurchase program, bringing the total number of shares authorized to 6.51 million, or almost 13 percent of its outstanding shares, the company said.
The announcement came just three weeks after SkyWest President Brad Rich acknowledged that a buyback was a “big topic of conversation” among investors who had seen the stock’s share price tumble as much as 55 percent since it last peaked in February.
Investors responded quickly Monday. Shares of the parent company of SkyWest Airlines and ExpressJet Airlines jumped 6 percent early before closing at $8.88, up 4.8 percent from Friday’s close.
SkyWest also declared a regular quarterly dividend of 4 cents. The dividend will be paid on Oct. 5 to shareholders of record as of Sept. 2 .
Mike Kraupp, SkyWest’s chief financial officer, said shareholders — mostly institutions and mutual funds — have been pressing the St. George-based carrier to resume repurchases that had been put on hold while it resolved maintenance and crew costs, and other issues, that had sapped earnings.
“We continue to hear from shareholders that ‘your stock is really undervalued. Why wouldn’t you be out in the market?’ ” Kraupp said. “There’s sort of an expectation from existing shareholders out there [who] believe that it’s a good use of our cash to be able to reinvest in our shares at this point in time.”
SkyWest had $630 million in cash and liquid securities on hand at the end of the quarter. Analysts often point to its balance sheet as the healthiest in the regional airline industry.
Despite several ups and downs, the company’s shares have averaged around $13.50 over the past four years. Kraupp declined to say how undervalued the board believes its stock price is, other than to assert that investors have discounted it too steeply. So, Kraupp hinted, it’s a positive sign that the company is willing to spend millions of dollars buying up its own shares.
“It creates an opportunity for us, based on our current cash position, to take some of that [stock] off the market, particularly at current prices. The board feels that it’s important, and it’s obviously just another good way to provide a good return to shareholders,” Kraupp said, adding that the buyback should have the effect of pushing up SkyWest’s earnings per share because there are fewer shares over which to divide the company’s profits.
SkyWest has had a buyback program since 2007. It has repurchased 18.5 million company shares since then, Kraupp said.