If you’re not on a trip or gearing up for one, you probably know someone who is: July and August are prime U.S. travel months, particularly as many Americans make up for lost pandemic time.
For travel stocks, it hasn’t been easy. Recently, Bernstein’s David Vernon downgraded
Southwest Airlines
to Market Perform from Outperform, cutting his price target to $32 from $41. Southwest has seen chaotic operations and lackluster earnings, and hasn’t regained prepandemic margins. All airlines face rising labor costs, but Southwest, he says, lacks the premium revenue of legacy carriers, has a “suboptimal” fleet, and is growing capacity at a clip that will produce less money per passenger.
Meanwhile, Raymond James’ William Crow noted headwinds for hotels, including “higher operating and nonoperating costs…higher rates, lower availability of debt, and slowing leisure demand.” Crow favors
Hilton Worldwide Holdings,
with its new-property pipeline and asset-light franchise strategy, and
Ryman Hospitality Properties,
with locations in hot areas like Orlando, Fla., and Denver that have few direct rivals to its hotels.
A number of online travel agencies reported results this past week.
Oppenheimer’s
Jed Kelly kept his recently raised $135 price target on
Expedia Group
despite the stock falling about 14% for the week, and raised his target on
Booking Holdings
to $3,700 after a strong quarter. He kept a Hold rating on
Airbnb,
citing valuation.
Write to Teresa Rivas at [email protected]
Last Week
Markets
The
S&P 500
notched its longest monthly win streak since 2021 on Monday as longtime bears, like
Morgan Stanley,
recanted and
Bank of America
officially said a recession wasn’t in the cards. Then the meteor struck: Fitch downgraded U.S. debt over the deficit and eroding governance. Stocks fell, and Treasury yields hit 2023 highs, before sliding. Friday saw a soft payrolls report. On the week, the
Dow Jones Industrial Average
fell 1.1%, the S&P was off 2.3%, and the
Nasdaq Composite
was off 2.8%.
Companies
More than 170 S&P 500 component companies reported earnings. Two sets of facts collided.
FactSet
data showed 80% of the companies reported earnings surprises. That was good. But different FactSet data suggested S&P 500 companies will show a 7% decline in year-over-year earnings, the largest quarterly decline in earnings since Covid hit in 2020. Not so good.
Apple
missed on hardware sales,
Amazon
beat on e-commerce.
Deals
The Wall Street Journal reported that
Walmart
paid $1.4 billion for hedge fund Tiger Global’s stake in Indian retailer Flipkart and also bought venture firm Accel’s 1% stake. Walmart bought 77% of Flipkart in 2018…Trucking company Yellow, beset by merger debt and labor problems, halted operations, threatening 30,000 jobs and talking bankruptcy…The WSJ reported
KKR
was in talks with
Paramount Global
to buy publisher Simon & Schuster for some $1.65 billon.
Write to Robert Teitelman at [email protected]
Next Week
Tuesday 8/8
Only three $100 billion-plus market cap companies in the S&P 500 index release results this week as earnings season winds down.
Eli Lilly
and
United Parcel Service
report before the opening bell on Tuesday, and
Walt Disney
after the bell on Wednesday.
Thursday 8/10
The Bureau of Labor Statistics releases the consumer price index for July. Consensus estimate is for the CPI to rise 3.3% year over year and the core CPI, which excludes volatile food and energy prices, to increase 4.8%. This compares with gains of 3.0% and 4.8%, respectively, in June. The CPI is at its lowest level since March of 2021.
Friday 8/11
The University of Michigan releases its Consumer Sentiment Index for August. In July, consumers’ expectations of the year-ahead inflation was 3.4%. Inflation expectations remain well anchored, despite the four-decade high CPI reading reached last summer.
The BLS releases the producer price index for July. Expectations are for the PPI to increase 0.7% from a year earlier, six-tenths of a percentage point more than in June. The core PPI is seen rising 2.5%, after a 2.4% gain in June.
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