The cyclical consumer sector represents industries that perform well during periods of economic boom. With the rapid economic recovery underway and COVID-19 vaccinations in full swing, the consumer cyclicals are expected to make a strong comeback from the pandemic-driven recession. Strong consumer confidence and surging retail sales over the past month have boosted cyclical stocks over this period.
According to Oppenheimer Asset Management’s John Stoltzfus, the S&P 500 will jump 15% to reach 5,330 by the end of 2022, with consumer discretionary being one of the biggest beneficiaries.
So,given the current market volatility due to the rapid spread of the omicron variant, we think investing in value consumer cyclical stocks Boyd Gaming Corporation (BYD) and Travel + Leisure Co. (TNL) could be beneficial. These stocks are well-positioned to capitalize on the economic recovery.
Boyd Gaming Corporation (BYD)
BYD in Las Vegas, Nev., is a multi-jurisdictional gaming company that operates in the Las Vegas Locals, Downtown Las Vegas, and Midwest & South segments. The Las Vegas Locals segment includes eight casinos, while the Downtown Las Vegas segment consists of three properties. The Midwest & South segment consists of Kansas Star Casino, Amelia Belle Casino, Diamond Jo Dubuque, Par-A-Dice Hotel Casino, and others.
On Oct.13, 2021, Aristocrat Gaming and BYD announced the launch of a cashless payment solution for table games called Boyd Pay Wallet, powered by Aristocrat’s digital wallet technology. BYD Senior VP and CIO Blake Rampmaier said, “Boyd Pay is another example of our commitment to leverage technology to enhance the guest experience at our properties.”
BYD’s revenue increased 29.3% year-over-year to $843.06 million for the third quarter, ended Sept. 30, 2021. The company’s adjusted earnings came in at $149.01 million, representing a 242.9% increase year-over-year. Also, its adjusted EBITDA increased 47.6% year-over-year to $314.39 million. And its EPS increased 242.1% year-over-year to $1.30.
Analysts expect BYD’s EPS and revenue for fiscal 2021 to increase 3,426.7% and 52.9%, respectively, year-over-year to $4.99 and $3.33 billion It has surpassed the Street’s EPS estimates in each of the trailing four quarters. Its forward EV/EBITDA and EV/EBIT of 8.73x and 11.66x, respectively, are lower than the 10.66x and 13.51x industry averages. Over the past year, the stock has gained 28.4% in price to close yesterday’s trading session at $63.50.
BYD’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B grade for Value. It is ranked #7 of 32 stocks in the Entertainment – Casinos/Gambling industry. Click here to see the other ratings of BYD for Growth, Momentum, Stability, and Sentiment.
Travel + Leisure Co. (TNL)
TNL provides hospitality services and products in the United States and internationally. The Orlando, Fla.-based company operates in the Vacation Ownership and Travel and Membership segments. The Vacation Ownership segment develops, markets, and sells vacation ownership interests, and provides consumer financing and property management services. The Travel and Membership segment operates various businesses, including a home exchange network, vacation exchange brands, travel technology platforms, travel memberships, etc.
On Sept. 8, 2021, TNL launched its Travel + Leisure Club, a travel subscription service. The members-only subscription travel club brings content from the Travel + Leisure magazine to life by allowing members to dream, plan, book, and go. The club members are afforded access to preferred pricing on featured itineraries from editorial coverage, extra savings on travel options, personalized concierge service, exclusive experiences, and complimentary subscription to the Travel + Leisure magazine.
For its fiscal third quarter. ended Sept. 30, 2021, TNL’s net revenues increased 36.6% year-over-year to $839 million. The company’s net income increased 152.5% year-over-year to $101 million. And its adjusted EBITDA increased 64% year-over-year to $228 million.
For its fiscal 2021, TNL’s EPS and revenue are expected to increase 463.8% and 41.3% year-over-year to $3.42 and $3.05 billion, respectively. It surpassed consensus EPS estimates in three of the trailing four quarters. In terms of forward Price/Cash Flow, TNL’s 10.63x is lower than the 12.99x industry average. The stock has gained 17.9% in price over the past year to close yesterday’s trading session at $56.27.
TNL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. TNL has a B grade for Growth, Value, Sentiment, and Quality. Within the Travel – Hotels/Resorts industry, it is ranked #2 of 20 stocks. To see the ratings of TNL for Momentum and Stability, click here.
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BYD shares were trading at $63.49 per share on Thursday afternoon, down $0.01 (-0.02%). Year-to-date, BYD has declined -3.17%, versus a -1.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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