The travel industry is set for significant growth, driven by rising demand for air travel, hospitality services, and travel products, as well as the increasing need for online travel platforms. With another surge in travel expected during the holiday season, particularly around Thanksgiving, Christmas, and New Year’s, the industry is back in full swing.
As vacation plans remain strong, investors could consider investing in these three fundamentally strong travel stocks: Expedia Group, Inc. (EXPE), Travel + Leisure Co. (TNL), and Tripadvisor, Inc. (TRIP).
The summer travel season saw strong passenger volumes, with the TSA screening an average of 2.70 million travelers daily since Memorial Day. The next opportunity for lower travel prices arrives in early October, just before holiday flights peak. Global travel spending is projected to surpass $2 trillion by the end of 2024, fueled by robust leisure travel in North America and Europe and rising demand in Asia-Pacific.
Moreover, those planning getaways later this year will likely benefit from lower gasoline and airfare prices caused by a historic Fed rate cut this month, which offers some relief from inflation and makes spontaneous trips more affordable. The global travel and tourism market is on track for substantial growth, with revenue expected to hit $916 billion by 2024 and reach $1.11 trillion by 2029.
A stable global economy and growing travel demand have also reassured business leaders to resume corporate travel. The GBTA Business Travel Index Report projects global business travel spending to surpass $2 trillion by 2028.
Considering these positive trends, let’s analyze the fundamental aspects of the three travel picks.
Expedia Group, Inc. (EXPE)
EXPE is a global online company operating through three segments: B2B; B2C; and Trivago. Its extensive portfolio of brands includes Expedia, Hotels.com, Vrbo, Orbitz, CheapTickets, ebookers, Hotwire, and CarRentals.com.
On July 18, EXPE announced a partnership with Ryanair Holdings plc (RYAAY), Europe’s leading airline, to offer low-fare flights to its travelers. This collaboration enhances travel options and experiences by integrating Ryanair’s budget-friendly flights into EXPE’s marketplace. Earlier this year, the companies collaborated on ‘Ryanair Rooms,’ allowing seamless hotel bookings with flights.
EXPE’s revenue for the fiscal second quarter that ended June 30, 2024, increased 6% year-over-year to $3.56 billion, while its operating income came in at $451 million, increasing 1.8% year-over-year.
Moreover, the company’s adjusted attributable net income and EPS amounted to $469 million and $3.51, rising by 9.6% and 21.5% year-over-year, respectively. Also, its adjusted EBITDA stood at $786 million, up 5.2% year-over-year.
Street expects EXPE’s revenue for the fiscal third quarter (ending September 2024) to increase 4.5% year-over-year to $4.11 billion, while its EPS for the same period is expected to grow 13.2% from the prior year to $6.12. Moreover, the company topped the EPS estimates in all of the trailing four quarters, which is impressive.
The stock has gained 47.7% over the past year to close the last trading session at $148.02.
EXPE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B grade for Growth and Value. Out of 52 stocks in the A-rated Internet industry, it is ranked #2.
Beyond what is stated above, we have also rated EXPE for Momentum, Stability, and Sentiment. Get all the EXPE ratings 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 11.36% is 155.3% higher than the 4.45% industry average. Likewise, its 19.71% trailing-12-month EBIT margin is 151.2% higher than the 7.85% industry average. Moreover, its trailing-12-month Return on Total Assets of 6.48% is 61.6% higher than the industry average of 4.01%.
TNL’s net revenues for the fiscal second quarter that ended June 30, 2024, increased 3.8% year-over-year to $985 million. Similarly, its adjusted EBITDA grew 3.4% from the year-ago value to $244 million. The company’s adjusted net income and adjusted EPS came in at $108 million and $1.52, respectively, up 8% and 14.3% over the prior-year quarter.
Analysts expect TNL’s revenue for the fiscal year ending December 2025 to increase 4.6% year-over-year to $4.05 billion. Its EPS for the same period is expected to rise 12.1% year-over-year to $6.29. It surpassed the Street EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 29%, closing the last trading session at $46.08.
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 Quality. Within the Travel - Hotels/Resorts industry, it is ranked #4 out of 20 stocks.
To access the other ratings of TNL for Growth, Momentum, Stability, and Sentiment, click here.
Tripadvisor, Inc. (TRIP)
TRIP operates as an online travel company and primarily engages in providing travel guidance products and services worldwide. The company operates through three segments: Brand Tripadvisor; Viator; and TheFork.
In terms of the trailing-12-month gross profit margin, TRIP’s 91.18% is 76.9% higher than the 51.56% industry average. Its asset turnover ratio of 0.66x is 32.9% higher than the 0.50x industry average. Also, its 12.95% trailing-12-month levered FCF margin is 63.1% higher than the industry average of 7.94%.
For the fiscal second quarter that ended June 30, 2024, TRIP’s revenue rose marginally year-over-year to $497 million. Its adjusted EBITDA stood at $97 million, up 7.8% year-over-year. For the same quarter, its non-GAAP net income and non-GAAP earnings per share, as adjusted, increased 16.3% and 14.7% over the prior-year quarter to $57 million and $0.39, respectively.
Street expects TRIP’s revenue for the fiscal year ending December 2025, to increase 6.5% year-over-year to $1.82 billion. Its EPS for the same period is expected to grow 16.9% year-over-year to $1.41. It surpassed the Street EPS estimates in each of the trailing four quarters.
TRIP’s stock closed the last trading session at $14.49.
TRIP’s POWR Ratings reflect a bright outlook. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. It is ranked #11 out of 52 stocks in the Internet industry.
To see TRIP’s Growth, Momentum, Stability, and Sentiment ratings, click here.
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EXPE shares were trading at $146.54 per share on Tuesday afternoon, down $1.48 (-1.00%). Year-to-date, EXPE has declined -3.46%, versus a 21.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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