Top travel stocks are catching investors’ eyes with consumer spending patterns revealing resilience despite the economic headwinds.
Though the concerns over a hard landing remain, data indicates that consumers are still happily opening their wallets for travel experiences. Moreover, airfares, car rentals, and hotel rates dipped last month, another catalyst for the travel stocks. According to NerdWallet’s Travel Price Index, travel costs are down 2% on a year-over-year (YOY) basis, highlighting a unique opportunity for consumers and investors alike. Hence, this backdrop sets the stage for savvy investors to bet on travel stocks that could yield healthy returns. That said, here are three strong picks in the travel niche.
United Airlines (UAL)
United Airlines (NASDAQ:UAL) is a leading airline operator that has proven to be a marvel of operational excellence. Take it from its latest earning print, which showed another comfortable top-and-bottom-line beat, with solid YOY growth in sales.
According to its management, UAL’s bottom line took a hefty $200 million hit from the Boeing 737 MAX 9 grounding. If it hadn’t been for that, UAL was most likely to deliver another quarterly profit. However, it ended up with a whopping $2.8 billion in operating cash flow and $1.5 billion in free cash flow, soothing investor concerns. Revenues were up almost 10% year over year on the back of stellar gains in Pacific and European regions.
Furthermore, despite the Boeing setback, UAL plans to purchase 61 narrowbody and 5 widebody aircraft this year. Also, it’s looking to expand its mid-continent hubs and build its international network further. Despite the positives, I agree with my fellow InvestorPlace contributor Josh Enomoto that UAL stock is heavily discounted relative to its pre-pandemic levels.
Marriott (MAR)
Marriott (NYSE:MAR) is a giant in the hospitality space, which has rebounded remarkably well in the post-pandemic era. With a diverse portfolio of roughly 8,800 properties spanning 139 countries, it has established itself as a bona fide giant in its niche. Additionally, the company has consistently paid dividends since 1995, solidifying its long-standing commitment to returning value to shareholders.
Marriott wrapped up last year, generating sales of $23.71 billion, rising by 14% YOY. Moreover, it expanded its operations last year, adding 81,300 rooms, with revenue per average room (RevPAR) increasing by 15%. Additionally, it’s experiencing solid growth in international markets, especially in the Asia and European regions.
It’s not to say that it’s been all smooth sailing for the hospitality giant in the past year. Its high-end brands, such as Ritz-Carlton, have witnessed a slowdown in RevPAR in recent quarters. This trend suggests a leveling off in demand for luxury accommodations but is likely to be a temporary problem for Marriott.
Corporacion America Airports (CAAP)
Corporacion America Airports (NYSE:CAAP) is a leading airport operator in the South American region, with 52 airports under its belt, serving over 80 million passengers annually. With its sizable operations in Argentina, including its primary Buenos Aires airports, and additional facilities in Brazil, Italy, Armenia, and other areas, CAAP’s influence is massive. Upwards of 81.1 million passengers utilized its facilities last year, making it a juggernaut in its niche.
Over the years, CAAP has proven to be a hugely profitable business. It has consistently outperformed the sector with its solid profit margins and return on equity, indicating efficient revenue conversion and shareholder value. Much of it concerns being an airport operator due to their nature as natural monopolies with low operational costs.
Looking ahead, CAAP recently posted an update that passenger traffic will increase by 0.8% YOY in March 2024, which points to an encouraging road ahead. Its stock has been up more than 50% in the past six months but still trades at a relatively attractive 11.31 times trailing twelve-month (TTM) earnings.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.