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Labor Day Weekend Traffic Forecast Rosy: 4 Hot Travel Picks
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Most Americans are planning to take a trip this Labor Day weekend, thanks to the drop in airfares and cheap gas prices. Travel is much in vogue these days, courtesy of an uptick in both personal income and wages.
Hence, it will be prudent to invest in travel and leisure companies positioned to grow on the back of this near-term surge in travel demand.
Air Travel Forecast
Airlines for America (A4A), the trade group representing the interests of U.S. airlines, projected 15.6 million flyers for the Labor Day holiday weekend this year – an increase of 4% from last year’s Labor Day flyer count. On a per day basis, about 2.23 million passengers will take to the sky, up approximately 82,000 a day over the same period last year.
The Labor Day holiday period stretches from Aug 31 to Sep 6, out of which Sep 1 and Sep 2 are projected to be the busiest. To meet such high travel demand, A4A stated that airlines are offering 2.54 million seats per day, an increase of more than 98,000 seats compared to last year.
Fares & Pre-Tax Profits
One of the primary reasons behind the rise in traffic this Labor Day is low airfares. Air ticket prices are down 6% so far this year, higher than the 5.2% decrease in 2015. On the other hand, airline pre-tax profits are up, according to A4A. Low fuel prices boosted profits by offsetting the increase in labor, aircraft and airport expenditures.
Collectively, all major airlines including Alaska Air Group, Inc. (ALK - Free Report) , Allegiant Travel Company (ALGT - Free Report) , American Airlines Group Inc , Delta Air Lines, Inc. (DAL - Free Report) , Hawaiian Holdings, Inc. (HA - Free Report) , JetBlue Airways Corporation (JBLU - Free Report) , Southwest Airlines Co (LUV - Free Report) , Spirit Airlines Incorporated (SAVE - Free Report) , United Continental Holdings Inc (UAL - Free Report) and Virgin America Inc VA posted a pre-tax profit of around $12 billion, up from $11.3 billion during the same period last year. This marks a profit margin of 15.5 cents on every dollar of revenue (read more: 3 Airline Stocks to Buy Despite Headwinds).
Roadway Traffic
American Automobile Association (AAA) projects a similarly rosy fate for roadways. A significant number of passengers are expected to hit the road, banking on low gas prices. In fact, AAA Manager of Public Relations, Tamra Johnson, stated that 55% of Americans are “more likely to take a road trip this year due to lower gas prices.”
Even though gas prices have been on the rise over the past few weeks due to higher crude oil prices, trouble in the Gulf Coast and impending tropical storms moving into the Gulf of Mexico, they are still cheaper by 27 cents this Labor Day weekend compared to the price a year ago. In fact, gas prices this Labor Day is the lowest since the Labor Day weekend in 2004. Currently, the average price per gallon is $2.22, nationally.
4 Travel Picks
As travel volume is expected to shore up, the travel and tourism industry is poised to benefit. Airlines are an obvious choice owing to the reduced fares. Another investment option is hotel and resort companies. More travel will lead to increase in hotel occupancy rate and in turn revenue per available room will scale higher. Meantime, travelling has taken over the Internet in a big way. Hence, companies that present the easiest way to gather information online are moving to the forefront in the travel industry.
Increase in personal income and wages is also one of the reasons why Americans are up for travel this time around. While personal income rose 0.4% in July, wages increased by 0.3% while increasing 2.6% on a yearly basis. Additionally, the average workweek rose by 0.1 hours to 34.5 hours last month. This is the highest rise recorded since the month of January (read more: 5 Stocks to Buy on Encouraging Employment Data).
We have selected four travel and leisure stocks that boast a Zacks Rank #2 (Buy). Estimated earnings growth for the current and next quarter for such stocks is encouraging and earnings estimates have also been revised higher lately.
SkyWest, Inc. (SKYW - Free Report) operates as one of the larger regional airlines in the United States.
The company’s estimated earnings growth rates for the current and next quarter are 14.08% and 13.27%, respectively. The company has also seen its earnings estimates rise from $2.53 a share two months ago to just $2.65 right now.
Copa Holdings, S.A. (CPA - Free Report) offers daily scheduled flights in North, Central and South America. CPA provides passengers with access to flights to more than 150 other destinations through codeshare arrangements with UAL and other airlines.
The company’s estimated earnings growth rates for the current and next quarters are 34.59% and 56.62%, respectively. The company has also seen its earnings estimates rise from $3.72 per share two months ago to just $4.45 right now (read more: Why is Copa Holdings a Must-Add to Your Portfolio?)
Marriott Vacations Worldwide Corp (VAC - Free Report) is a developer, seller and manager of vacation ownership and related products under the Marriott Vacation Club and Grand Residences by Marriott brands. The company operates through three segments including North America, while it runs more than 60 resorts with over 400,000 Owners and Members.
Marriott Vacations Worldwide’s estimated earnings growth rates for the current and next quarter stand at 46.75% and 37.24%, respectively. The company has also seen its earnings estimates rise from $4.48 a share two months ago to just $4.65 right now.
Priceline Group Inc is one of the world's largest online travel agents. The companyoperates a bunch of travel sites including Priceline.com, booking.com, agoda.com and rentalcars.com.
Priceline Group’s estimated earnings growth rates for the current and next quarter are 19.26% and 20.85%, respectively. The company has also seen its earnings estimates rise from $63.21 a share two months ago to just $64.87 right now (read more: Priceline Earnings Beat As Usual, Shares Up).
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Labor Day Weekend Traffic Forecast Rosy: 4 Hot Travel Picks
Most Americans are planning to take a trip this Labor Day weekend, thanks to the drop in airfares and cheap gas prices. Travel is much in vogue these days, courtesy of an uptick in both personal income and wages.
Hence, it will be prudent to invest in travel and leisure companies positioned to grow on the back of this near-term surge in travel demand.
Air Travel Forecast
Airlines for America (A4A), the trade group representing the interests of U.S. airlines, projected 15.6 million flyers for the Labor Day holiday weekend this year – an increase of 4% from last year’s Labor Day flyer count. On a per day basis, about 2.23 million passengers will take to the sky, up approximately 82,000 a day over the same period last year.
The Labor Day holiday period stretches from Aug 31 to Sep 6, out of which Sep 1 and Sep 2 are projected to be the busiest. To meet such high travel demand, A4A stated that airlines are offering 2.54 million seats per day, an increase of more than 98,000 seats compared to last year.
Fares & Pre-Tax Profits
One of the primary reasons behind the rise in traffic this Labor Day is low airfares. Air ticket prices are down 6% so far this year, higher than the 5.2% decrease in 2015. On the other hand, airline pre-tax profits are up, according to A4A. Low fuel prices boosted profits by offsetting the increase in labor, aircraft and airport expenditures.
Collectively, all major airlines including Alaska Air Group, Inc. (ALK - Free Report) , Allegiant Travel Company (ALGT - Free Report) , American Airlines Group Inc , Delta Air Lines, Inc. (DAL - Free Report) , Hawaiian Holdings, Inc. (HA - Free Report) , JetBlue Airways Corporation (JBLU - Free Report) , Southwest Airlines Co (LUV - Free Report) , Spirit Airlines Incorporated (SAVE - Free Report) , United Continental Holdings Inc (UAL - Free Report) and Virgin America Inc VA posted a pre-tax profit of around $12 billion, up from $11.3 billion during the same period last year. This marks a profit margin of 15.5 cents on every dollar of revenue (read more: 3 Airline Stocks to Buy Despite Headwinds).
Roadway Traffic
American Automobile Association (AAA) projects a similarly rosy fate for roadways. A significant number of passengers are expected to hit the road, banking on low gas prices. In fact, AAA Manager of Public Relations, Tamra Johnson, stated that 55% of Americans are “more likely to take a road trip this year due to lower gas prices.”
Even though gas prices have been on the rise over the past few weeks due to higher crude oil prices, trouble in the Gulf Coast and impending tropical storms moving into the Gulf of Mexico, they are still cheaper by 27 cents this Labor Day weekend compared to the price a year ago. In fact, gas prices this Labor Day is the lowest since the Labor Day weekend in 2004. Currently, the average price per gallon is $2.22, nationally.
4 Travel Picks
As travel volume is expected to shore up, the travel and tourism industry is poised to benefit. Airlines are an obvious choice owing to the reduced fares. Another investment option is hotel and resort companies. More travel will lead to increase in hotel occupancy rate and in turn revenue per available room will scale higher. Meantime, travelling has taken over the Internet in a big way. Hence, companies that present the easiest way to gather information online are moving to the forefront in the travel industry.
Increase in personal income and wages is also one of the reasons why Americans are up for travel this time around. While personal income rose 0.4% in July, wages increased by 0.3% while increasing 2.6% on a yearly basis. Additionally, the average workweek rose by 0.1 hours to 34.5 hours last month. This is the highest rise recorded since the month of January (read more: 5 Stocks to Buy on Encouraging Employment Data).
We have selected four travel and leisure stocks that boast a Zacks Rank #2 (Buy). Estimated earnings growth for the current and next quarter for such stocks is encouraging and earnings estimates have also been revised higher lately.
SkyWest, Inc. (SKYW - Free Report) operates as one of the larger regional airlines in the United States.
The company’s estimated earnings growth rates for the current and next quarter are 14.08% and 13.27%, respectively. The company has also seen its earnings estimates rise from $2.53 a share two months ago to just $2.65 right now.
Copa Holdings, S.A. (CPA - Free Report) offers daily scheduled flights in North, Central and South America. CPA provides passengers with access to flights to more than 150 other destinations through codeshare arrangements with UAL and other airlines.
The company’s estimated earnings growth rates for the current and next quarters are 34.59% and 56.62%, respectively. The company has also seen its earnings estimates rise from $3.72 per share two months ago to just $4.45 right now (read more: Why is Copa Holdings a Must-Add to Your Portfolio?)
Marriott Vacations Worldwide Corp (VAC - Free Report) is a developer, seller and manager of vacation ownership and related products under the Marriott Vacation Club and Grand Residences by Marriott brands. The company operates through three segments including North America, while it runs more than 60 resorts with over 400,000 Owners and Members.
Marriott Vacations Worldwide’s estimated earnings growth rates for the current and next quarter stand at 46.75% and 37.24%, respectively. The company has also seen its earnings estimates rise from $4.48 a share two months ago to just $4.65 right now.
Priceline Group Inc is one of the world's largest online travel agents. The companyoperates a bunch of travel sites including Priceline.com, booking.com, agoda.com and rentalcars.com.
Priceline Group’s estimated earnings growth rates for the current and next quarter are 19.26% and 20.85%, respectively. The company has also seen its earnings estimates rise from $63.21 a share two months ago to just $64.87 right now (read more: Priceline Earnings Beat As Usual, Shares Up).
Zacks' Best Investment Ideas for Long-Term Profit
Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>