The seven-day average of COVID-19 cases has reached 95,000 in the U.S., representing a five-fold rise in less than a month. As the Delta variant of the coronavirus is spreading rapidly in various states across the country, the government has once again imposed travel restrictions. Although there has been solid progress on the vaccination front in the country, the rising fears and travel restrictions will likely disrupt the travel industry once again.
Last month, the U.S. government confirmed that existing travel restrictions would not be lifted in the near term. Thus, while the path to recovery for the travel industry was well underway, a significant upsurge in cases around the globe has changed that. Travel stocks, which are highly vulnerable to rising COVID-19 cases, are struggling to remain upbeat compared to other stocks.
Therefore, it is advisable to avoid travel-related stocks such as Booking Holdings Inc. (BKNG), Carnival Corporation & plc (CCL), Hyatt Hotels Corporation (H), and Spirit Airlines Inc. (SAVE), that are yet to gain enough strength to survive the industry headwinds.
Booking Holding Inc. (BKNG)
BKNG provides travel and restaurant online reservation and related services worldwide. Booking.com; Rentalcars.com; Priceline; and Agoda are among the operating segments of the company. In addition, it also offers KAYAK, an online price comparison service that allows customers to search and compare travel itineraries and costs; and OpenTable, which allows customers to book online restaurant reservations.
BKNG’s operating expenses increased 98.9% year-over-year to $2.22 billion in the second quarter that ended June 30, 2021. Its operating loss came in at $56 million, while its net loss came in at $167 million for this period, compared to a net income of $122 million in 2020. The company’s loss per share totaled $4.08, compared to an EPS of $2.97 in the prior-year period. The stock has declined 1.4% over the past month and 5.6% over the past three months.
BKNG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of D, which translates to Sell in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BKNG has an F grade for Growth, and a D for Value. Within the F-rated Internet industry, it is ranked #54 out of 74 stocks.
To see additional POWR Ratings grades for Stability, Sentiment, Quality, and Momentum for BKNG, click here.
Carnival Corporation & plc (CCL)
CCL offers leisure travel services internationally. The company’s brand portfolio includes Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard.
Last month, CUK announced the closing of its private offering of $2.4 billion aggregate principal amount of 4% First-Priority Senior Secured Notes due 2028. The company plans to use the net proceeds to fund its previously announced tender offer to purchase up to $2.0 billion aggregate principal amount of 11.5% First Priority Senior Secured Notes due 2023.
CCL’s revenue declined 93.2% year-over-year to $50 million in the second quarter that ended May 31, 2021. It reported an operating loss of $1.62 billion, while its net loss came in at $2.07 million. Its loss per share totaled $1.83 over this period.
CCL’s EPS is expected to decline at the rate of 115.6% per annum over the next five years. In addition, analysts expect CCL’s revenue to decline 39.6% in the current year. CCL has declined 13.5% over the past month and 15% over the past three months.
CCL’s poor prospects are also apparent in its POWR Ratings. The stock has an overall grade of F, which equates to Strong Sell in our proprietary ratings system.
It also has an F grade for Value, Sentiment, and Stability. In addition, CCL is ranked #3 out of 4 stocks in the F-rated Travel-Cruises industry.
Click here to see the additional grades for CCL. (Quality, Momentum, and Growth).
Hyatt Hotels Corporation (H)
H develops, owns, operates, and provides services to a portfolio of assets, including full-service hotels, select-service hotels, resorts, and other properties. Owned and Leased Hotels; Americas Management and Franchising; ASPAC Management and Franchising; and EAME/SW Asia Management and Franchising are the company’s four segments. Its hotel portfolio operated approximately 1000 hotels as of March 31, 2021.
During the second quarter that ended June 30, 2021, H’s operating expenses increased 44.3% year-over-year to $733 million. The company reported a net loss of $9 million, while its loss per share amounted to $0.08 over this period.
The company’s EPS is expected to remain negative in the current year. Moreover, H failed to beat the consensus EPS estimates in each of the trailing four quarters. H’s stock has declined 5.5% over the past month and 6.4% over the past three months.
H’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall grade of D, which equates to Sell rating in our POWR Ratings system. The stock also has a D grade for Quality, Stability, and Sentiment. In the D-rated Travel-Hotels/Resorts industry, it is ranked #16 out of 19 stocks.
In addition to the grades I have just highlighted, you can see H’s grades for Momentum, Value, and Growth here.
Spirit Airlines Inc. (SAVE)
SAVE is an airline services provider operating 78 flights each week to 78 locations in 16 countries around the United States, Latin America, and the Caribbean. The company had a fleet of 157 Airbus single-aisle aircraft as of December 31, 2020. It sells its tickets through spirit.com, call centers, and airport ticket counters, as well as various third-party agents.
SAVE’s operating expenses increased 132.9% year-over-year to $766.10 million in the second quarter that ended June 30, 2021. Its net loss surged 99.3% from the year-ago value to $287.86 million, while its loss per share grew 50.8% year-over-year to $2.73 over this period.
The company’s EPS is expected to decline at the rate of 48.8% per annum over the next five years. Analysts expect its EPS to remain negative in fiscal 2021. The stock has declined 12.7% over the past month and 21.7% over the past three months.
SAVE’s POWR Ratings are consistent with this bleak outlook. The stock has a D grade for Stability, and a C for Growth and Sentiment. In addition, the stock is ranked #21 out of 30 stocks in the F-rated Airlines industry.
Beyond the POWR Ratings grades I have just highlighted, you can see SAVE’s grades for Value, Momentum, and Quality here.
BKNG shares were trading at $2,158.40 per share on Friday morning, down $49.31 (-2.23%). Year-to-date, BKNG has declined -3.09%, versus a 19.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More…