Is corporate travel dead? Not judging by recent surveys.
According to a June survey of more than 900 Americans, 75% of respondents who took four or more work-related trips in 2019 said they plan to take their next business flight within three months.
Nine out of 10 people surveyed (90%) said they plan to take as many business trips over the coming year as they did before the Covid-19 pandemic hit in March 2020, and 31% of respondents said they planned to travel more for business over the next 12 months.
The reason for the rebound in business travel is that teleconferencing, while convenient, has limits. Corporate travelers say they need to meet people in-person to cultivate relationships with customers, suppliers and business partners.
Here we look at three stocks to buy to play the coming recovery in business travel.
Corporate Travel Stocks: American Express (AXP)
American Express remains the number one credit card for business travel and related expenses. The company and AXP stock should each get a lift from the recovery in corporate travel.
Already American Express is seeing a turnaround after a difficult 2020. In this year’s first quarter, card member spending was 11% higher than in the first quarter of 2019, before the pandemic. Owing in part to that increase, American Express reported net income of $2.2 billion in this year’s first quarter, up from just $367 million in the same period last year.
The positive results and outlook have helped AXP stock rebound strongly. Year to date, American Express’ share price has risen 43% to $169.27.
That is not only better than the 19% gain for the S&P 500 stock index, but is also ahead of American Express’ larger rivals Visa (NYSE:V), up 10%, and Mastercard (NYSE:MA), up 7%.
In fact, through the end of July, American Express was the best performing stock in the Dow Jones Industrial Average so far in 2021. Going forward, American Express plans to continue efforts to reach younger consumers.
American Express recently announced second-quarter earnings that showed the company had a net profit of $2.3 billion on revenue of $10.2 billion, up 33% from a year earlier. Both numbers were ahead of forecasts by Wall Street analysts.
Wyndham Hotels & Resorts (WH)
When looking for stocks to play the resumption in business travel, you’ll want a hotel chain, and Wyndham Hotels & Resorts is a good pick.
The company operates brands such as Howard Johnson, Days Inn, Ramada and Super 8 and is the largest hotel franchisor in the world with 9,280 locations spread across the globe.
WH stock recently got a bump after the company’s second-quarter earnings topped Wall Street’s expectations.
Wyndham Hotels & Resorts reported Q2 earnings per share (EPS) of $0.95, 40% higher than the $0.68 per share that analysts had called for. In the second quarter of 2020, Wyndham Hotels earnings per share were just $0.10 during the peak of the pandemic.
The company has now surpassed consensus EPS estimates for four consecutive quarters. Second-quarter revenue of $406 million missed analyst expectations by a slight 0.96%, but investors seemed to shrug it off and sent WH stock up 4% following the earnings results.
WH stock is now up 19% for the year, matching the gain of the S&P 500 index. Looking forward, the hotel and resort chain sees continued strong growth as both leisure travel rebounds this summer and corporate travel picks up during the fall and winter.
With so many hotel brands under its nameplate, Wyndham Hotels is a great stock to capitalize on the return of business travel.
Delta Air Lines (DAL)
Airlines will also gain from a resumption in corporate travel, and while most U.S. carriers will benefit, Delta Airlines is the best bet for investors given its overall financial health coming out of the pandemic.
Delta isn’t just recovering from the global Covid-19 pandemic, the company just reported a profit for this year’s second quarter, its first profitable quarter since the end of 2019. Furthermore, Delta provided forward guidance that it expects to be profitable for the remainder of this year.
Delta has been able to recover and return to profitability faster than other airlines because the company kept its debt from ballooning during the pandemic (the company is well-known for buying used rather than new aircraft).
The most lucrative part of Delta Air Lines’ business comes from corporate not leisure travelers. In its second-quarter earnings, Delta reported that domestic business travel in June was about 40% of the level it was at in 2019. While still depressed, business travel in this year’s second quarter was more than double the 20% level it stood at in March of this year.
DAL stock is up less than 1% on the year at $38.96. However, analysts see plenty of upside ahead. The median price target on the airline’s shares is $56.50, implying a 45% gain in the coming 12 months.
Disclosure: On the date of publication, Joel Baglole 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.
