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The Zacks Analyst Blog Highlights Southwest Airlines, Delta Air Lines, Bally's, Marriott International and Playa Hotels & Resorts

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For Immediate Release

Chicago, IL – June 01, 2022 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Southwest Airlines (LUV - Free Report) , Delta Air Lines (DAL - Free Report) , Bally's (BALY - Free Report) , Marriott International (MAR - Free Report) and Playa Hotels & Resorts (PLYA - Free Report) .

Here are highlights from Tuesday’s Analyst Blog:

Americans Making the Most of Summer Travel Season

Memorial Day travel may be viewed as a precursor to the summer travel season. And initial forecasts indicate that Americans have had just about enough of the pandemic. While the vaccines have been an emboldening factor, they don't explain the fact that usual economic indicators like the deteriorating consumer sentiment, rising inflation (including the higher cost of fuel and lodging), and falling real income have not been reliable indicators.

The American Automobile Association (AAA) has a forecast for the five-day period from Thursday, May 26 to Monday, May 30 that it calls the Memorial Day holiday travel period. It expects travel volumes this year to reach 92% of pre-pandemic levels in 2019.

Auto remains the most favored mode of travel accounting for 82% of total travel according to the report. It represents a 4.6% increase from last year to 93% of pre-pandemic 2019 levels. Air travel represents a 7.7% share (highest since 2011), jumping 25% from last year and given the rising ticket prices, is evidence of how rapidly air travel demand is rebounding. Travel by other modes, such as trains, buses and cruise ships are tripling from last year to make up the balance.

In January, the American Hotel & Lodging Association came out with their "State of the Hotel Industry" report, which said that a full recovery in the industry was still several years away. However, according to an analysis it commissioned, "hotel room night demand and room revenue are projected to nearly return to 2019 levels in 2022.

"Room revenues are projected to reach $168 billion, within 1% of 2019 figures and an increase of 19% compared to 2021. Occupancy is projected to hit 63.4%, nearing the 66.0% rate achieved in 2019 and far above the 44% and 57.6% reached in 2020 and 2021, respectively."

The weakness is expected to be on the business side, with leisure travel expected to recover fully in 2022. In fact, the report mentions a mixed category it calls Bleisure that has emerged from the pandemic. When people were forced to travel for work during these risky times, they tried to make the most of it by combining the trip with some pleasure activity. Another category is "digital nomads."

The stumbling block for demand is said to be Omicron and other variants, as well as some impact from inflation. But as we can see today, this has turned out better than expected. People are notably less afraid of the virus and are traveling despite the rising costs.  

Inflation is also a factor on the supply side, raising costs for hoteliers who have already suffered two bad years. And a tight labor market not only raises the cost of operation but also means that hotels may not be able to make the most of the demand out there.

To see how all this is actually impacting companies, let's take a few examples:

As far as airlines are concerned, Southwest Airlines and Delta Air Lines are looking strong. While the broader industry is not too attractive right now (Zacks has a bottom 34% rating on it), both Southwest and Delta stocks have #1 (Strong Buy) ratings. And that's because they are seeing positive estimate revisions.

In the last 60 days, Southwest's 2022 earnings estimate has increased $1.18 (108.3%) while the 2023 estimate has increased 70 cents (22.7%). The current-quarter estimate has increased 150% in the last 60 days. Not only that – analysts expect its revenue and earnings to grow a respective 47.3% and 205.6% this year followed by a respective 10.4% and 66.4% in 2023.

Southwest has also started beating analyst estimates. In the last two quarters, it has topped the Zacks Consensus estimate, which seems to be a reflection of the positive sentiments across the industry. As far as valuation is concerned, the industry P/E of 15.8X is still below the 17.8X for the S&P 500 and its own median level of 29.0X over the past year.

Delta's 2022 earnings estimate is up $1.10 (71.4%) in the last 60 days while the 2023 estimate is up 31 cents (5.7%). The current quarter estimate is up 83.6% in the last 60 days. Its revenue and earnings are expected to grow 54.6% and 164.7%, respectively in 2022.

This is expected to be followed up with 9.4% revenue growth and 117.4% earnings growth in the following year. Delta has topped estimates in each of the last four quarters and its average surprise is 43.7%. At 10.8X earnings it's really cheap.

A larger number of hotels are seeing the positive news play out, which is the reason for the Hotels and Motels industry being placed in the top 28%. I'm presenting three 3 #1 ranked stocks that could be worth investing in. They are Bally's, Marriott International and Playa Hotels & Resorts.

Bally's 2022 estimate has gone from a loss of -$1.06 to a profit of $0.96 in the last 30 days. The 2023 estimate has gone from -$0.22 to $1.41. A similar change is seen in the current quarter's estimate which has increased from a loss of 11 cents 30 days ago to a profit of 30 cents.

Revenue and earnings growth is expected to be a respective 82.0% and 20.0% this year followed by 11.6% and 47.4% in the next. The company reversed a trend of negative surprises in the preceding three quarters to post a 46.5% positive surprise in the last. It trades at 23.3X earnings, which is not too expensive.

Marriott's 2022 earnings estimate has increased 40 cents (7.2%) and its 2023 estimate has increased 23 cents (3.2%) in the last 30 days. The current quarter estimate is up 13 cents (9.2%) in the same period.

Analysts are looking for 42.9% revenue growth and 87.2% earnings growth this year and 12.0% revenue growth and 22.4% earnings growth in the next. Its preceding four-quarter average positive surprise is 36.2%. Marriott trades at 26.5X earnings, which while ahead of the S&P 500 (which is normal for this stock) is below its own median level over the past year.

Playa Hotels is also seeing positive estimate revisions in the last 30 days: 15 cents (88.2% increase) for 2022, 14 cents (40% increase) for 2023 and 3 cents (100%) increase for the current quarter.

Analysts currently expect Playa's revenue to grow 52.5% in 2022 and 5.4% in 2023. Its earnings are expected to grow 166.7% in 2022 and 53.1% in 2023. It doesn't have a consistent record in beating or missing estimates.

But in the last quarter, it beat the Zacks Consensus Estimate by 90.0%. It trades at 21.7X earnings, which is  below its median level over the past year.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

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