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4 Stocks to Avoid if there is Another Coronavirus Lockdown

There may be another round of coronavirus lockdown in the United States as the number of new cases keeps on rising. If that happens, companies that operate in the already-struggling travel industry such as Marriott (MAR), Delta Air Lines (DAL), Carnival (CCL), and Hertz (HTZ) could witness further business decline. However, some believe that travel stocks have already priced in short-term challenges and will rise on the prospects of a vaccine.  

The coronavirus cases have been continuously rising. On Friday, the United States broke another record and reported 126,480 new cases in a single day. The President-elect Joe Biden has promised to take more proactive steps to curb the spread of the virus.

If there is another round of lockdown, businesses that have already struggled this year in the “new normal” may face an even more difficult time. In particular, the travel industry has been the worst hit due to travel restrictions, and people preferring to stay at home. Will these stocks react to the lockdowns or the prospects of a vaccine.

Companies like Marriott International, Inc. (MAR), Delta Air Lines, Inc. (DAL), Carnival Corporation (CCL), and Hertz Global Holdings, Inc. (HTZ) have faced significant losses so far this year. Even though their stocks surged yesterday on the news about Pfizer’s trial vaccine, the long-term recovery of these companies could be more difficult if another lockdown measure is taken to resist the second wave of the virus. For now, it would be wise to avoid these stocks.

Marriott International, Inc. (MAR)

MAR operates, franchises, and licenses luxury hotels and properties globally. The company runs through The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, Grand Residences by Marriott, and Marriott Vacation Club. The stock has fallen 31.4% so far this year.

The company is facing a penalty of $23.8 million from the UK’s ICO relating to a data breach that affected the privacy of 339 million guests in 2014. The company is facing low occupancy rates due to the spread of the coronavirus and global lockdowns and is attempting to incrementally bring more business by offering a special package for remote workers.

During the third quarter, the company’s net income fell 74% year-over-year to $100 million. The company’s constant dollar RevPAR declined 65.9% worldwide compared to the same period last year.

MAR’s revenue is expected to fall 47.4% during the quarter ended December 2020 and 47.1% in 2020. The company’s EPS is estimated to decline 105.5% in 2020 and at a rate of 7.3% per annum over the next five years.

MAR is rated a “Sell” in our POWR Ratings system, with an “F” in Trade Grade and a “D” in Buy & Hold Grade and Peer Grade. Within the 14-stock Travel – Hotels/Resorts industry, the company is ranked #9.

Delta Air Lines, Inc. (DAL)

DAL offers scheduled air travel for travelers and cargo in the United States and internationally. The company has operations in two segments — airline and refinery. DAL’s stock has lost 46.3% so far this year.

Recently, the company has suspended flights to 16 cities in the United States due to coronavirus-related fears. If the US goes into another lockdown and extends federal travel restrictions, there would be a significant negative impact on the airline industry. The company has also postponed the relaunch of flights between the US and South Africa until 2021.

During the third quarter, the company’s revenue saw a decline of 76% compared to the same period last year and it was even lower than analysts’ expectations. The company’s adjusted EPS was -$8.47 per share compared to $2.31 a year ago.

DAL’s revenue is expected to fall by 66.1% during the quarter ended in December 2020 and 64% in 2020. The company’s EPS is estimated to decline 242.8% in 2020 and at a rate of 22.4% per annum over the next five years.

DAL is rated a “Sell” in our POWR Ratings system, with an “F” in Buy & Hold Grade and a “D” in Trade Grade and Industry Rank. Within the 22-stock Airlines industry, the company is ranked #6.

Carnival Corporation (CCL)

CCL offers cruise services in the United States and internationally. The company operates through Carnival Cruise Lines, Costa Cruises, P&O Cruises, Holland America Lines, and more. CCL’s stock has declined by 72.1% so far this year.

Currently, most of the company’s cruise operations are on hold due to coronavirus-related fears. The company is expected to resume cruises in the US after December 1st. However, this schedule could be stopped again if there is another lockdown.

During the third quarter, the company reported an adjusted net loss of $1.7 billion. CCL is expected to remove a total of 18 less-efficient ships from its fleet to streamline its operations.

CCL’s revenue is expected to fall 96% for the quarter ended in November 2020 and 72.4% in 2020. The company’s EPS is estimated to decline by 267% in 2020 and at a rate of 37.8% per annum over the next five years.

CCL is rated a “Strong Sell” in our POWR Ratings system, with an “F” in Trade Grade, Buy & Hold Grade, and Industry Rank. Within the 5-stock Travel - Cruises industry, the company is ranked #4.

Hertz Global Holdings, Inc. (HTZ)

HTZ provides cars and trucks for rent or lease in the United States and internationally. The company engages in four segments — US car rental, international car rental, worldwide equipment rental, and other operations. HTZ’s stock has declined by 92.7% so far this year.

The company has recently filed for bankruptcy caused by the severe hit that the travel industry took due to the coronavirus. However, the company is in talks to gain financing to the tune of $1.65 billion as part of the Chapter 11 proceedings. Additionally, the company has secured financing of $4 billion to refresh its vehicle fleet.

During the second quarter, the company’s total revenues declined 70% year-over-year. The company’s vehicle utilization was 28% compared to 82% a year ago.

HTZ’s revenue is expected to fall 42% for the quarter ended in December 2020 and 43.3% in 2020. The company’s EPS is estimated to decline 632.6% in 2020 and at a rate of 17.3% per annum over the next five years.

HTZ is rated a “Sell” in our POWR Ratings system, with an “F” in Buy & Hold Grade and a “D” in Trade Grade and Peer Grade. 

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MAR shares were trading at $118.48 per share on Tuesday afternoon, up $14.59 (+14.04%). Year-to-date, MAR has declined -21.45%, versus a 11.58% rise in the benchmark S&P 500 index during the same period.



About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.

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