4 Travel & Tourism Stocks to Buy Now

Data released earlier this month by the French government show that the country’s tourism sector has emerged unscathed from last year’s devastating terrorist attacks on Paris. In fact, a record number of tourists visited continental France in 2015, significantly higher than the number of visitors in 2014. This only indicates that the global tourism industry continues to stand strong in the face of several challenges.

Meanwhile, springtime is visiting the U.S., one of the few bright spots of a global economy burdened by many a concern. The U.S. consumer’s spending power continues to grow, buoyed by a number of factors such as low fuel prices and an improving employment scenario. At this point, picking winning travel and tourism stocks seems to be a sensible option.

Impressive Growth, Strong Employment Scenario

The “third” estimate of U.S. GDP indicated that the metric increased at an annual rate of 1.4% in the fourth quarter, more than the consensus estimate of a 1% rise. First quarter advance figures due this week are likely to indicate a slower pace of growth. At the same time, it is likely that they will also indicate that worries about an impending recession have been blown out of proportion.

Consumer spending has been the primary engine of U.S. GDP for a long time now. This in turn is being fueled by a buoyant job market. The U.S. economy created a total of 242,000 jobs in February, significantly beating the consensus estimate of 194,000. Jobless claims figures released last week show that claims for the week ending April 16 settled at their lowest level since 1973.

Low Oil Prices, Stronger Dollar

One of the factors boosting consumer expenditure is lower oil prices. This in turn increases the consumer’s purchasing power since fuel expenses have declined. In February, household outlays on services adjusted for inflation rose 0.3%. This includes spending on personal and health care items as well as tourism.

Additionally, one of the factors weighing on the U.S. economy, especially exports, has been a stronger dollar. However, this may prove to a boon when it comes to travel and tourism, since a stronger dollar is an advantage when travelling abroad. This is because it boosts the affordability of travel and tourism services and facilities.

Our Choices

An emboldened U.S. consumer is likely to utilize this springtime to travel within the country and abroad. Despite the naysayers, the economy remains inherently strong and more and more people are securing jobs. At the same time, low inflation and oil prices mean that disposable income will remain high.

The travel and tourism sector is likely to benefit from the resultant increase in consumer expenditure. Currently, adding stocks from this sector to your portfolio seems to be a smart choice. At the same time, it is important to pick winning stocks.  

This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.

Travelport Worldwide Limited TVPT is a travel commerce platform providing distribution, technology, payment and other solutions for the global travel and tourism industry.

Travelport has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The company has expected earnings growth of 27.6% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 14.97, lower than the industry average of 18.31.

SkyWest Inc. SKYW through its wholly owned subsidiary, SkyWest Airlines, Inc., operates one of the larger regional airlines in the U.S.

SkyWest has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 8.6% for the current year. It has a P/E (F1) of 9.36, in line with the industry estimate.

Royal Caribbean Cruises Ltd. RCL is a Miami-based a cruise company which serves  the contemporary, premium and deluxe segments of the cruise vacation industry,

Royal Caribbean has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 25.6% for the current year. It has a P/E (F1) of 12.17, which is lower than the industry average of 17.63. Its earnings estimate for the current year has improved by 0.4% over the last 30 days.

Vail Resorts Inc. MTN is an operator of mountain resorts and urban skiing facilities in the U.S.

Vail Resorts has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 36.7% for the current year. Its earnings estimate for the current year has improved by 1.5% over the last 30 days.

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SKYWEST INC (SKYW): Free Stock Analysis Report
 
ROYAL CARIBBEAN (RCL): Free Stock Analysis Report
 
VAIL RESORTS (MTN): Free Stock Analysis Report
 
TRAVELPORT WWD (TVPT): Free Stock Analysis Report
 
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