The travel industry had a major setback last year as leisure and business travel practically came to a halt and most hotels closed. But as the COVID-19 vaccines developed by companies such as Pfizer Inc. (PFE) and Moderna, Inc. (MRNA) received Emergency Use Authorization (EUA) from the FDA, it was expected that the travel industry’s prospects would soon improve. However, despite more than 50% of American adults now fully vaccinated, the travel industry has yet to see sufficient demand to return to profitability.
The key reason behind consumers’ avoidance of international travel is that several parts of the world are experiencing a resurgence of COVID-19 cases. Also, the vaccine hesitancy of many Americans is creating a challenge for people that may want to travel domestically. Furthermore, several tourist destinations and travel-related companies have increased their charges to stay solvent amid the difficult market situation. The increased charges are hardly an inducement to lure more travelers.
Given this backdrop, we think travel-related companies Royal Caribbean Group (RCL), Hyatt Hotels Corporation (H), and Hawaiian Holdings, Inc. (HA) are unfavorably positioned going into the summer because of their weak financials. So, we think it’s wise to avoid their shares now.
Royal Caribbean Group (RCL)
RCL is a cruise company that operates through three global cruise vacation brands: Royal Caribbean International, Celebrity Cruises, and Silversea Cruises. It offers a range of travel destinations, including Alaska, Asia, Bermuda, Canada, the Caribbean, and Europe, with cruise lengths ranging from two to 24 nights.
On May 22, RCL announced its plans to launch its Alaska season with seven-night cruises—roundtrip from Seattle—on returning favorites Serenade and Ovation of the Seas, beginning July 19 and August 13, respectively. However, because the economy has not yet fully recovered from the COVID-19 pandemic, it’s uncertain how many consumers will be willing to take advantage of the company’s initiative.
RCL’s revenue for the first quarter, ended March 31, 2021 was $42.01 million, which represents a 97.9% decrease from the prior-year quarter. The company’s net loss was $1.13 billion compared to a $1.44 billion loss in the prior-year period. It’s loss per share came in at $4.66 compared to a $6.91 loss in the year-ago period.
RCL’s revenue is expected to decrease 2,215.9% year-over-year to $712.82 million for the quarter ending September 30, 2021. And analysts expect RCL’s EPS to remain negative in its fiscal year 2021. The stock has gained only 5.4% over the past three months to close yesterday’s trading session at $96.25.
RCL’s poor prospects are apparent in its POWR Ratings also. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. It has an F grade for Value and Quality, and a D grade for Sentiment, Stability and Growth. Click here to see the additional POWR rating for RCL (Momentum).
RCL is ranked #2 of 4 stocks in the F-rated Travel-Cruises industry.
Hyatt Hotels Corporation (H)
One of the established players in the hospitality space, H operates through four segments: Owned and Leased Hotels, Americas Management and Franchising, ASPAC Management and Franchising, and EAME/SW Asia Management and Franchising. It operates its properties under several brands, including the Park Hyatt, Miraval, Grand Hyatt, and Hyatt Regency.
The company announced on March 31, 2021 that it plans to grow its brand footprint in India by more than 70% by 2023. However, with the resurgence of COVID-19 cases across India, it’s uncertain how long it will take for the company to achieve its goal.
H’s gross profit declined 55.9% year-over-year to $438 million for the first quarter, ended March 31, 2021. The company’s net loss came in at $304 million compared to a $103 million net loss in the prior-year period. It’s loss per share for the quarter came in at $2.99 compared to a $1.02 loss in the year-ago period.
Analysts expect the company’s annual revenue to increase 41.2% year-over-year to $2.92 billion in its fiscal year 2021. However, its EPS is expected to remain negative in 2021 and 2022. The stock has lost 9.3% over the past three months to close yesterday’s trading session at $79.94.
H’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. It has a D grade for Growth, Stability, Value, Quality and Sentiment. Click here to see H’s rating for Momentum as well.
H is ranked #18 of 19 stocks in the F-rated Travel-Hotels/Resorts industry.
Hawaiian Holdings, Inc. (HA)
Headquartered in Honolulu, Hawaii, HA is in the scheduled air transportation of passengers and cargo business. Through its subsidiary, Hawaiian Airlines, Inc., it offers daily services on North America routes between the State of Hawai’i and Long Beach, Los Angeles, Oakland, Sacramento, and San Diego, among others.
HA became the first carrier to provide nonstop flights between Central Texas and Hawai’i and celebrated the inauguration of its twice-weekly nonstop service on April 23, 2021. However, service is still in the early stages and it is still to be seen if the route can attract sufficient travelers amid the pandemic.
The company’s operating revenue came in at $182.20 million for the first quarter, ended March 31, 2021, which represents a 67.4% year-over-year decline. Its net loss for the quarter came in at $60.70 million compared to a $144.40 million loss in the year-ago period. HA’s loss per share came in at $1.23 compared to a $3.14 loss in the prior-year period.
HA’s revenue is expected to increase 50.7% year-over-year to $2.54 million in its fiscal 2022. However, the company’s EPS is expected to remain negative in 2021. The stock has lost 0.8% over the past three months to close yesterday’s trading session at $26.30.
HA has an overall D rating, which translates to Sell in our proprietary rating system. It has a D grade for Sentiment, Growth, Value and Stability. In addition to the POWR Ratings grades we’ve just highlighted; we’ve also rated it for Quality and Momentum. Click here to see all HA ratings.
HA is ranked #27 of 29 stocks in the F-rated Airlines industry.
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RCL shares were trading at $96.87 per share on Wednesday afternoon, up $0.62 (+0.64%). Year-to-date, RCL has gained 29.70%, versus a 12.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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