The travel industry is set for significant growth, driven by rising demand for air travel, hospitality services, and travel products, as well as the increasing need for online travel platforms. The next tourism surge is expected during the holiday season, particularly around Thanksgiving, Christmas, and New Year’s.

Therefore, investors may want to consider strong travel stocks like SkyWest, Inc. (SKYW), Travel + Leisure Co. (TNL), and Tripadvisor, Inc. (TRIP) ahead of this boom.

The summer travel season saw strong passenger volumes, with the TSA screening an average of 2.70 million travelers daily since Memorial Day. The next opportunity for lower travel prices arrives in early October, just before holiday flights peak. Global travel spending is projected to surpass $2 trillion by the end of 2024, fueled by robust leisure travel in North America, and Europe, and rising demand in Asia-Pacific.

Meanwhile, the travel sector is gaining momentum, boosted by high-speed internet that enables seamless connections to flight, hotel, and dining platforms. Looking ahead, ACI projects global passenger volume to reach 9.50 billion in 2024, reflecting a 10% year-on-year growth from 2023, underscoring the optimism surrounding air travel’s continued recovery.

Furthermore, as the season approaches, hotels are focusing on competitive pricing and enhancing guest experiences with perks like room upgrades, complimentary breakfasts, and loyalty discounts. The U.S. hotel market is projected to grow to $110.60 billion by 2024, with a 3.8% CAGR expected through 2029, reaching $133.30 billion and further boosting the tourism sector.

Considering these conducive trends, let’s analyze the fundamental aspects of the three travel picks.

SkyWest, Inc. (SKYW)

SKYW and its subsidiaries engage in the operation of a regional airline in the United States. It operates through two segments, SkyWest Airlines and SWC, as well as SkyWest Leasing. The company also leases regional jet aircraft and spare engines to third parties and provides on-demand charter, airport customer, and ground handling services.

In terms of the trailing-12-month EBITDA margin, SKYW’s 21.41% is 54.3% higher than the 13.88% industry average. Its 7.51% trailing-12-month Capex / Sales is 157.4% higher than the industry average of 2.92%. Also, SKYW’s 13.05% trailing-12-month levered FCF margin is 103.2% higher than the industry average of 6.42%.

During the fiscal second quarter that ended June 30, 2024, SKYW’s total operating revenues increased 19.5% year-over-year to $867.12 million. Its operating income was $119.64 million, up 275.5% from the prior year’s quarter. Moreover, the company’s net income and EPS rose 390.2% and 420% year-over-year, respectively, to $75.58 million and $1.82.

For the quarter ending September 30, 2024, SKYW’s revenue is expected to increase 16.5% year-over-year to $892.62 million. Its EPS for the same quarter is expected to increase 255.2% year-over-year to $1.95. It surpassed consensus EPS estimates in each of the trailing four quarters. SKYW’s stock has gained 99.4% over the past year to close the last trading session at $83.59.

SKYW’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Growth and a B for Quality. It is ranked #5 out of 26 stocks in the Airlines industry. Beyond what we stated above, we have also rated SKYW for Value, Momentum, Stability, and Sentiment. Get all ratings of SKYW here.

Travel + Leisure Co. (TNL)

TNL and its subsidiaries provide hospitality services and travel products in the United States and internationally. The company operates through two segments: Vacation Ownership and Travel and Membership.

In terms of the trailing-12-month net income margin, TNL’s 11.36% is 148.4% higher than the 4.57% industry average. Likewise, its 19.71% trailing-12-month EBIT margin is 150.5% higher than the 7.87% industry average. Moreover, its 6.48% trailing-12-month Return on Total Assets is 57.5% higher than the industry average of 4.12%.

TNL’s net revenues for the second quarter that ended June 30, 2024, increased 3.8% year-over-year to $985 million. Similarly, its adjusted EBITDA grew 3.4% from the year-ago value to $244 million. The company’s adjusted net income and adjusted EPS came in at $108 million and $1.52, respectively, up 8% and 14.3% over the prior-year quarter.

Street expects TNL’s revenue for the quarter ending September 30, 2024, to increase 2.5% year-over-year to $1.01 billion. Its EPS for the quarter ending March 31, 2025, is expected to rise 14.9% year-over-year to $1.11. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 25.6%, closing the last trading session at $45.91.

It’s no surprise that TNL has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.

TNL has a B grade for Value and Quality. Within the Travel – Hotels/Resorts industry, it is ranked #5 out of 20 stocks. To access the other ratings of TNL for Growth, Momentum, Stability, and Sentiment, click here.

Tripadvisor, Inc. (TRIP)

TRIP operates as an online travel company and primarily engages in providing travel guidance products and services worldwide. The company operates through three segments: Brand Tripadvisor, Viator, and TheFork.

In terms of the trailing-12-month gross profit margin, TRIP’s 91.18% is 78.5% higher than the 51.09% industry average. Its 0.66x asset turnover ratio is 32.2% higher than the 0.50x industry average. Also, its 12.95% trailing-12-month levered FCF margin is 62.1% higher than the industry average of 7.99%.

For the second fourth quarter that ended June 30, 2024, TRIP’s revenue rose marginally year-over-year to $497 million. Its adjusted EBITDA stood at $97 million, up 7.8% year-over-year. For the same quarter, its non-GAAP net income and non-GAAP earnings per share as adjusted increased 16.3% and 14.7% over the prior-year quarter to $57 million and $0.39, respectively.

Analysts expect TRIP’s revenue for the quarter ending December 31, 2024, to increase 1.9% year-over-year to $397.53 million. Its EPS for fiscal 2025 is expected to grow 16.9% year-over-year to $1.41. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past month, TRIP’s stock has gained 1.6% to close the last trading session at $14.83.

TRIP’s POWR Ratings reflect a bright outlook. It has an overall rating of B, translating to a Buy in our proprietary rating system.

It has an A grade for Quality and a B for Value. It is ranked #15 out of 52 stocks in the B-rated Internet industry. To see TRIP’s Growth, Momentum, Stability, and Sentiment ratings, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

SKYW shares were trading at $82.62 per share on Wednesday afternoon, down $0.97 (-1.16%). Year-to-date, SKYW has gained 58.28%, versus a 21.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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