The United Nations World Tourism Organization forecasts 3% to 4% growth in international tourism this year. Travelers Today writes that international tourism comprises 30% of global services exports and 6% of overall goods and services exports. With this in mind, we ran a screen to find which travel and tourism stocks were likely to deliver as international tourism continues to grow.
We began with a universe of stocks from the Dow Jones Travel & Tourism Index, lodging industry, and resorts and casinos industry. Next, we screened for those with high earnings growth, with 5-year projected EPS growth above 15%.
Finally, we narrowed our list down to stocks with a bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future.
For an interactive version of this chart, click on the image below. Average analyst ratings sourced from Zacks Investment Research.
1. Travelzoo Inc. (TZOO): Publishes travel and entertainment offers from various travel and entertainment companies in North America and Europe.
- Market cap at $437.15M, most recent closing price at $28.46.
- 5-year projected EPS growth at 19.80%.
- Net institutional purchases in the current quarter at 603.8K shares, which represents about 8.8% of the company's float of 6.86M shares. The 2 top holders of the stock are Bares Capital Management Inc and BlackRock Institutional Trust Company, N.A.
Travelzoo's most recent closing price is 4.4% lower than its 52-week high of $29.80. Competitors Expedia (EXPE) and Priceline's (PCLN) latest closing prices are down by 13.5% and 5.5%, respectively, from their 52-week highs.
The online travel company's first quarter 2013 revenue was $42.2 million, a 7.4% increase from the same period last year. Revenue was also 2.4% higher than the average revenue estimate of $41.23 million. Net income soared by 49% year-over-year to $5.6 million. Earnings per share fell by 14.3% from last year's $0.42 to $0.36 last quarter; however, Wall Street Cheat Sheet reports that the EPS still beat analysts' estimates of $0.34 and increased sequentially by 50% from the fourth quarter of 2012. Furthermore, Travelzoo's EPS grew by 465.98% over the last 12 months while Priceline's EPS grew by 34.08% and TripAdvisor Inc (TRIP)'s grew by 4.22%.
Presently, Travelzoo in the midst of rolling out a hotel booking platform that will enable users to easily search for deals via web or mobile. Tnooz reports that only 600 hotels will be listed on the platform initially, and that number will expand to 3000 international locations. No date has been provided for the platform's late-2013 launch, and CEO Chris Loughlin expects Travelzoo to invest $900,000 into the platform this quarter without any immediate revenue.
Travelzoo's free cash flow stands at $6 million. The company has $66 million in cash and cash equivalents and $0 in long term debt.
2. HomeAway, Inc. (AWAY): Operates an online marketplace for the vacation rental industry.
- Market cap at $2.58B, most recent closing price at $30.36.
- 5-year projected EPS growth at 32.50%.
- Net institutional purchases in the current quarter at 4.5M shares, which represents about 8.01% of the company's float of 56.16M shares. The 2 top holders of the stock are Wells Fargo & Company and Technology Crossover Management VII, Ltd.
HomeAway Inc's most recent closing price is 11.5% lower than its 52-week high of $34.30. Competitor TripAdvisor 's latest closing price is down by 3.7% from its 52-week high.
The vacation site had $79.5 million in revenue last quarter, an increase of 24% year-over-year. Earnings per share rose by 55.56% to $0.14 from $0.09 in the first quarter of 2012. Wall Street Cheat Sheet reports that the company beat the analysts revenue estimate of $78.64 million and the earnings estimate of $0.13 per share. However, AWAY has returned -1.14% since April 29, and falls way behind peers TripAdvisor Inc. and Priceline, who returned 16.24% and 14.54%, respectively, during the same time period.
Earlier this month, HomeAway launched RezOvation Web, a new cloud-based property management software for innkeepers, which costs $64 a month. The company will launch a pay-per-booking product by the end of the third quarter for U.S. customers. CEO Brian Sharples expects the pay-per-booking product to help the company add properties in the fourth quarter, bringing it closer to its goal of a 15% paid listing growth rate from last quarter's approximately 9.5% rate.
HomeAway has $32 million in free cash flow as well as $314 million in cash and cash equivalents. The company has $0 in long term debt.
3. Avis Budget Group, Inc. (CAR): Provides car and truck rentals, and ancillary services to businesses and consumers in the United States and internationally.
- Market cap at $3.42B, most recent closing price at $31.71.
- 5-year projected EPS growth at 30.17%.
- Net institutional purchases in the current quarter at 7.7M shares, which represents about 8.65% of the company's float of 89.03M shares. The 2 top holders of the stock are SRS Management, LLC and Dimensional Fund Advisors LP.
Avis's most recent closing price is 7% lower than its 52-week high of $34.07. Competitor Hertz Global Holdings, Inc (HTZ)'s latest closing price is down by 4.7% from its 52-week high.
Revenue increased by 4.19% to $1.69 billion compared to the first quarter of 2012, but it fell short of the $1.7 billion average analyst estimate. The company's earnings per share decreased by 33.33% year-over-year to $0.08, yet it still beat analysts' estimates of $0.02. Over the last year, Avis's EPS has grown by 977.05%, surpassing competitor Hertz Global Holdings, Inc. 's 36.92% growth rate.
Avis acquired Zipcar during the first quarter of 2013 and expanded its car sharing services to eleven airports including John F. Kennedy International Airport, LaGuardia Airport, and Newark Liberty Airport . The company expects $11 million in synergies from the Zipcar acquisition this year and $45 million in 2014, which is in line with the company's previously expressed estimate of $50 to $70 million in benefits within two years.
Investors should note that short sellers believe there's more downside to Avis. Its short float stands at 15.08%, which is equivalent to 8.44 days of average trading volume, and is noticeably higher than Hertz's short float at 8.80%, representing 4.32 days of trading volume. Avis's free cash flow stands at -2.83 billion. The company has $569 million in cash and cash equivalents and $10.78 billion in long term debt.
*Institutional data sourced from Fidelity. All other data sourced from Finviz.