Social distancing mandates, the widespread availability of COVID-19 treatments, and steady progress on the vaccination front have led to a decline in COVID-19 cases worldwide. Furthermore, the U.S. Centers for Disease Control and Prevention expects COVID-19 deaths and hospitalizations to fall. As a result, most countries are lifting their international travel restrictions, making the backdrop favorable for the travel and tourism industry.
Companies in this space are witnessing an uptick in demand ahead of the forthcoming holiday season, and the travel and tourism market is expected to grow at a 24.5% CAGR to $924.27 billion by 2025.
Given this backdrop, we think travel and tourism stocks InterContinental Hotels Group PLC (IHG), China Eastern Airlines Corporation Limited (CEA), SkyWest, Inc. (SKYW), and Bluegreen Vacations Holding Corporation (BVH) could deliver solid upside in the near term. So, it could be wise to bet on these stocks now.
InterContinental Hotels Group PLC (IHG)
Based in the U.K., IHG owns, manages, franchises, and leases hotels, resorts, restaurants, and spas under an established and diverse group of brands worldwide. The company manages hotel loyalty and priority club rewards programs. As of December 31, 2020, the IHG had approximately 5,964 hotels and 886,036 rooms in approximately 100 countries.
On October 13, IHG signed a management agreement with notable real estate developer Dinesh Kumar Choudhary (HUF) for a new hotel–the Holiday Inn Express & Suites Jaipur Karoli Bagh, located in Jaipur, India. As one of India’s most popular leisure destinations, which is home to numerous industries, the company expects to witness great hotel bookings from domestic and international travelers. The hotel is expected to be operational by the first quarter of 2023.
On October 11, IHG announced the establishment of its footprint in Italy, with the opening of three new hotels and the signing of two more. The company is looking forward to capitalizing on the increase in demand for its premium and lifestyle brands, such as voco and Hotel Indigo,
For the half-year, ended June 30, 2021, IHG’s operating profit came in at $138 million, compared to a $233 million loss in the prior-year period. While its adjusted earnings increased 722.2% year-over-year to $74 million, its adjusted earnings increased 724.5% year-over-year to $0.40. IHG had $988 million in cash and cash equivalents as of June 30, 2021.
IHG’s EPS is estimated to rise 280.3% year-over-year to $1.19 in the current year. Analysts expect its revenue to be $1.39 billion for the current year, representing a 40.3% rise year-over-year. Over the past three months, the stock has gained 9.4% in price and ended yesterday’s trading session at $70.48.
IHG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Quality, Momentum, and Sentiment. Click here to see the additional ratings for IHG’s Value and Stability.
Of the 20 stocks in the Travel – Hotels/Resorts industry, IHG is ranked #4.
China Eastern Airlines Corporation Limited (CEA)
CEA is a China-based company that is engaged principally in the provision of airline transportation and extended services internationally. It offers flight training, airline maintenance, import and export, investment, leasing, consultation services, hotel services, the research and development of technology and products in aviation. It also offers an e-commerce platform and ticket agent services. As of December 31, 2020, CEA operated a fleet of 734 aircraft, including 725 passenger aircraft and nine business aircraft.
For the half-year ended June 30, 2021, CEA’s operating income increased 37.9% year-over-year to RMB37.74 billion ($5.90 billion). Its EBITDA came in at RMB5.75 billion ($899.44 million), up 191% from the prior-year period. The company had RMB15.55 billion ($2.43 billion) in cash and cash equivalents as of June 30, 2021.
Analysts expect CEA’s revenue to be $12.53 billion for the current year, representing a 44.6% rise year-over-year. The stock has gained 7.1% in price over the past month and closed yesterday’s trading session at $20.27.
CEA’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Growth and Sentiment. Click here to see the additional ratings for CEA (Value, Stability, Quality, and Momentum).
CEA is ranked #1 of 29 stocks in the Airlines industry.
SkyWest, Inc. (SKYW)
SKYW in St. George, Utah, operates as a regional airline, providing scheduled passenger, air freight services, hotel reservations, car hire, online booking, and visa services to various destinations worldwide. It also provides airport customer and ground handling services and leases regional jet aircraft and spare engines to third parties. As of December 31, 2020, the company’s fleet consisted of 601 aircraft.
On August 9, 2021, SKYW signed a multi-year capacity purchase agreement with Delta Air Lines, Inc. (DAL) to purchase and operate 16 new E175 aircraft. The aircraft are scheduled to begin service in the first half of 2022 and will replace 16 SKYW-owned CRJ900s. With these new, dual-class aircraft, SKYW hopes to better serve its partners and passengers and work toward its full domestic recovery in the coming months.
On May 12, SKYW forged an agreement with Alaska Air Group, Inc.’s (ALK) Alaska Airlines to purchase and operate eight E175 aircraft under a 12-year capacity purchase agreement. These aircraft are scheduled to be placed into service beginning in the first half of 2022. For its fiscal second quarter, ended June 30, 2021, SKYW’s total operating revenues increased 87.7% year-over-year to $656.99 million. The company’s operating income came in at $115.02 million, versus a $4.40 million loss in the prior-year period. SKYW’s net income was $61.99 million for the quarter, versus a $25.72 million loss in the year-ago period. Its EPS came in at $1.22, versus a $0.51 loss per share in the prior-year period. The company had $345.85 million in cash and cash equivalents as of June 30, 2021.
Analysts expect the stock’s EPS to improve 1964.7% year-over-year in the current year to $3.17. A $2.63 billion consensus revenue estimate for the current year indicates a 23.5% year-over-year improvement. SKYW has gained 28.8% in price over the past three months and ended yesterday’s trading session at $47.90.
SKYW’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value, Sentiment, and Quality. Click here to see the additional ratings for SKYW’s Growth, Stability, and Momentum.
SKYW is ranked #2 in the Airlines industry.
Bluegreen Vacations Holding Corporation (BVH)
BVH markets and sells vacation ownership interests (VOI) and manages resorts in popular leisure and urban destinations. The company provides resort management, mortgage servicing, title services, construction design, development services, financing to qualified VOI purchasers, and management services to vacation clubs and homeowners’ associations. BVH also offers fee-based resort management, financial, and sales, and marketing services to, or on behalf of, third parties.
On May 6, 2021, BVH announced plans to acquire the remaining ownership stake in its 93% owned subsidiary, Bluegreen Vacations Corporation (BXG) through a statutory short-form merger. Alan B. Levan, BVH’s Chairman and CEO, commented, “We believe that going forward this will end confusion in the market as BVH’s results will now reflect 100% of Bluegreen’s results and will address the inefficiencies of two public companies.”
BVH’s total revenue for its fiscal second quarter, ended June 30, 2021, increased 183.6% year-over-year to $193.46 million. The company’s income from continuing operations came in at $23.88 million, compared to a $24.97 million loss in the prior-year period. Its net income came in at $23.88 million, versus a $24.97 loss per share in the year-ago period. Its EPS was $0.93, compared to a $1.95 loss in the prior-year period. The company had $216.11 million in cash and cash equivalents as of June 30, 2021.
BVH’s revenue is estimated to be $735.19 million for the current year, indicating a 41.5% rise from the prior-year period. It surpassed Street’s EPS estimates in three of the trailing four quarters. BVH’s EPS is expected to grow at a 10% rate per annum over the next five years. Over the past year, the stock has gained 46.5% in price and ended yesterday’s trading session at $23.53.
It’s no surprise that BVH has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Value and Sentiment. Click here to see the additional ratings for BVH’s Growth, Quality, Stability, and Momentum. Of the 20 stocks in the Travel – Hotels/Resorts industry, BVH is ranked #1.
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IHG shares were unchanged in after-hours trading Wednesday. Year-to-date, IHG has gained 7.66%, versus a 22.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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