In this 40-page report we preview 2020, as well as upcoming earnings season, and we look at key themes for the stocks in our coverage. We’re also introducing quarterly 2020 estimates and annual estimates through 2023, and our target prices now extend to YE20 (Ex. 3). Valuations for our group remain well below prior peaks (Ex. 1), and the stocks are trading at historic lows versus consumer staples (Ex. 2).
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In this week’s piece we discuss five topics, including 1) valuations for our coverage are trading near historic lows relative to consumer staples in this risk-off and defensive-oriented tape; 2) improved advance hotel booking trends for the third straight month; 3) visitation trends to Macau during Golden Week thus far; 4) thoughts on recent NCLH management changes; and 5) thoughts around price dislocation in CCL’s dual listing with the LSE equity trading at a large discount to the NYSE equity.
The cycle has dominated the narrative for cruise, gaming and lodging since 2018 when the macro began to slow, which is understandable for our cyclical coverage. We expect macro developments to dictate near-term stock performance, but over the longer term we believe global travel still has secular drivers, which we’ll examine. We believe those secular drivers include 1) a growing middle class in emerging economies, like China, 2) an aging U.S. population with time and money to travel, 3) consumption behavior which has shifted in favor of travel, 4) a growing importance on multi-generational travel, and 5) still under-penetration of travel.
In this week’s piece we discuss 1) read-throughs to RCL and NCLH from CCL’s F3Q report; 2) expectations for the upcoming VAC analyst day; 3) new resort fee legislation introduced in the House, and what that means for our coverage; and 4) Vegas RevPAR outperformance versus the rest of the country, and why we believe that will continue well into next year.
In this week’s piece we discuss four topics: 1) a rotation from growth to value last week, and what that means for our coverage; 2) healthy U.S. GGR trends in August and thoughts on September; 3) timeshare stocks now seem back in favor, which we’ll discuss, including some LBO math on HGV that we think would seem to support a buyout; and 4) the hurricane forecast and measuring the likelihood of another storm as we’re now over halfway through the Atlantic hurricane season.
Oil prices seem likely to spike on Monday (9/16/19) following news of the strikes at Saudi oil fields over the weekend. Below we review exposure to rising fuel prices for each of our sub-sectors. The biggest impact is a negative impact to cruise lines.
The U.S. ISM manufacturing PMI has been in a downtrend for the last year, and this week it fell below the key 50 level for the first time since August 2016. In this week’s piece we examine the implications for our coverage by looking at industry stock returns over the last 25 years in relation to when PMI drops below 50 as well as when PMI eventually bottoms.
Current reports indicate Hurricane Dorian is strengthening and could make landfall in Florida as a Category 3 storm on Sunday.
We’ve taken a fresh look at our assumptions for each company now that 2Q earnings season has been digested. Some estimates come up, some come down, and some don’t move as we just changed some of the assumptions with various offsets. Each is detailed below.