The travel industry is poised for substantial growth as demand surges for air travel, leisure services, and hospitality – especially with the holiday season approaching. Hence, investors may want to consider robust travel stocks like Carnival Corporation & plc (CCL), SkyWest, Inc. (SKYW), Travel + Leisure Co. (TNL), all well-positioned to capitalize on this rising demand.
Travel demand is high this upcoming season, driven by favorable weather conditions. Air travel continues to be popular, while warmer destinations like Florida and California draw holiday and business travelers. Moreover, cruises remain a top choice for leisure seekers seeking unique experiences. As a result, global travel spending is projected to exceed $2 trillion by the end of 2024.
Meanwhile, airlines are encouraging early bookings, offering better deals with added flexibility and bundled packages that drive demand for both domestic and international flights. Additionally, with the integration of AI to enhance the travel experience, ACI projects global passenger volume to reach 9.5 billion in 2024, reflecting a 10% year-on-year growth from 2023.
On top of it, cruise vacations are booming in popularity due to their unique experiences, convenience, and the opportunity to visit multiple destinations in one trip. Consumer demand for diverse cruise options, along with advancements in ship design and technology, is fueling industry growth. The global cruise market is expected to reach $53.49 billion by 2029, with a 4.81% CAGR.
Considering these favorable trends, let’s analyze the fundamental aspects of the three travel picks.
Carnival Corporation & plc (CCL)
CCL engages in the provision of leisure travel services internationally. The company operates through four segments: NAA Cruise Operations, Europe Cruise Operations, Cruise Support, and Tour and Other.
In terms of the trailing-12-month gross profit margin, CCL’s 51.96% is 39% higher than the 37.40% industry average. Its 19.24% trailing-12-month Capex / Sales is 561% higher than the 2.91% industry average. However, the stock’s 20.12% trailing-12-month Return on Common Equity is 78.3% lower than the 11.28% industry average.
For the fiscal third quarter that ended August 31, 2024, CCL’s revenue rose 15.2% year-over-year to $7.90 billion. Its adjusted EBITDA stood at $2.82 billion, up 27.1% year-over-year. For the same quarter, its adjusted net income and adjusted earnings per share as adjusted increased 48.9% and 47.7% over the prior-year quarter to $1.75 billion and $1.27, respectively.
Analysts expect CCL’s revenue for the quarter ending November 30, 2024, to increase 9.6% year-over-year to $5.91 billion. Its EPS for the quarter ending May 31, 2025, is expected to grow 95.9% year-over-year to $0.22. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, CCL’s stock has gained 95.4% to close the last trading session at $23.96.
CCL’s POWR Ratings reflect a bright outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth and Value. It is ranked #2 out of 4 stocks in the Travel - Cruises industry. To see CCL’s Momentum, Stability, Sentiment, and Quality ratings, click here.
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 22.94% is 64.4% higher than the 13.96% industry average. Its 7.46% trailing-12-month Capex / Sales is 159.5% higher than the industry average of 2.87%. Also, SKYW’s 12.57% trailing-12-month levered FCF margin is 88.4% higher than the industry average of 6.67%.
During the fiscal third quarter that ended September 30, 2024, SKYW’s total operating revenues increased 19.1% year-over-year to $912.79 million. Its operating income was $131.44 million, up 166.7% from the prior year’s quarter. Moreover, the company’s net income and EPS rose 282.1% and 292.7% year-over-year, respectively, to $89.71 million and $2.16.
For the quarter ending December 31, 2024, SKYW’s revenue is expected to increase 19.9% year-over-year to $901.47 million. Its EPS for the same quarter is expected to increase 325% year-over-year to $1.79. It surpassed consensus EPS estimates in each of the trailing four quarters. SKYW’s stock has gained 158.5% over the past year to close the last trading session at $113.81.
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 Sentiment and a B for Growth and 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, and Stability. 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 10.99% is 149% higher than the 4.41% industry average. Likewise, its 19.56% trailing-12-month EBIT margin is 141.8% higher than the 8.09% industry average. Moreover, its 6.29% trailing-12-month Return on Total Assets is 57.6% higher than the industry average of 3.99%.
TNL’s net revenue for the second quarter, which ended September 30, 2024, increased marginally year-over-year to $993 million. Similarly, its adjusted EBITDA and adjusted net income were $242 million and $110 million, respectively. Moreover, the company’s adjusted EPS was $1.54, up 1.9% from the prior-year quarter.
Street expects TNL’s revenue for the quarter ending December 31, 2024, to increase 2.6% year-over-year to $959.11 million. Its EPS for the quarter ending March 31, 2025, is expected to rise 9.3% year-over-year to $1.06. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 52.5%, closing the last trading session at $53.36.
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 Sentiment. Within the Travel - Hotels/Resorts industry, it is ranked #3 out of 20 stocks. To access the other ratings of TNL for Growth, Momentum, Stability, and Quality, click here.
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CCL shares were trading at $23.81 per share on Thursday afternoon, down $0.42 (-1.73%). Year-to-date, CCL has gained 28.43%, versus a 26.60% 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.
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