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Independence Day Travel to Hit All-Time High: 5 Must Buys

A record number of Americans will be venturing away from home to celebrate Independence Day this year.

Such a spike in travel is being backed by cheaper gas prices, a 16-year low rate of unemployment and confident consumers. This calls for investing in the travel space for attractive returns.

July 4 to See Record High Travel

According to a forecast from auto club AAA, a record number of travelers are projected to travel 50 miles or more. A total of 44.2 million travelers are expected to travel this Independence Day, reflecting an increase of 2.9% or 1.25 million from last year. This will mark the most travelled Independence Day since AAA has started tracking the numbers. 

Almost 37.5 million travelers are expected to drive, showing an increase of 2.9% over last year’s Independence Day. About 3.44 million leisure travelers will take to the skies, which is 4.6% higher than the year-ago level. Meanwhile, travel by other modes of transport like cruises, trains and buses is expected to increase 1.4% to 3.27 million. 

Travelers will enjoy lower prices for car rentals and airfares on the day. Daily car rentals on an average are expected at around $65, which is 14% lower than last Independence Day. Average airfares for top 40 domestic flight routes will be 10% lower this year compared to last year, with an average round ticket coming at $186.

Bustling Summer Air Travel Season

Independence Day travel is poised to be the busiest for holidaymakers, adding to the already lively summer air travel season. According to the Airlines for America (A4A), around 234.1 million passengers or approximately 2.54 million per day are expected to take to the skies between June and August, which represents an all-time high. This also represents growth of 4% over last summer’s 224.8 million travelers. During this period, airlines have been adding 123,000 seats per day to accommodate the additional 100,000 passengers likely to fly. 

Jack Christine, deputy aviation director of Charlotte Douglas International Airport in North Carolina, the second largest transportation hub in the U.S. said that “we will break records this summer”, while Oakland International Airport expects a 10% increase in passenger count from last year (read more: Air Travel to Hit All-Time High This Summer: Top 5 Picks).

What’s Driving Travel this Independence Day?

Lower gas prices have been a primary catalyst. While the average price for gas is $0.04 less than this time last year, the national average price for a gallon of gas stands at $2.28. This is a historic low for the summer travel season and is, particularly, a major contributing factor toward the increase in road travelers this Independence Day. Bill Sutherland, AAA senior vice president, Travel and Publishing further added that “combined, strong employment and higher consumer confidence bode well for the travel industry, in particular this Independence Day”.

Upbeat Jobs Market

The unemployment rate declined from 4.4% to 4.3% in May, marking the lowest since 2001. Since January, the unemployment rate has experienced a decrease of 0.5%. The "U-6," considered to be a broader measure of unemployment, since it includes those who are working part time for purely economic reasons, declined to 8.4%. This also marks the lowest level since mid-2007.

Job additions in May were 138,000, much lower than the consensus estimate of 184,000. Despite the decline in job additions for May, several economists believe that the situation is not as bad as it seems. With full employment within reach, the economy may need to add only 100,000 jobs on a regular basis to maintain growth levels (read more: 5 Stocks to Buy as Jobless Rate Hits 16-Year Low).

Consumer Confidence High

The Consumer Confidence index rebounded to 118.9 in June from 117.6 in May. The Present Situation Index also rose from 140.6 to 146.3. Consumers’ estimation of prevailing business conditions has also improved this month.

The Conference Board’s Director of Economic Indicators said that consumers’ outlook on the economy touched a near 16-year high in June. Additionally, even though consumers believe that the pace of growth may remain slow, they expect economic expansion to continue unhindered (read more: Consumers Remain Confident: Buy These 5 Top-Rated Picks).

5 Solid Travel Picks

Cheaper gasoline prices, an upbeat labor market and a rise in consumer confidence are prompting more number of people to plan a holiday this Independence Day. Given such factors, travel and leisure stocks are set to break records this summer. We have, thus, selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

SkyWest, Inc. SKYW operates regional airline operations in the U.S. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings advanced 1.6% over the last 60 days. The company’s expected growth rate for the current year is 16.3%, in contrast to the Transportation - Airline industry’s projected decline of 6.9%. The company has gained 29.3% in the last one year.

Southwest Airlines Co LUV operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the U.S. and near-international markets. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 1.8% over the last 60 days. The company’s expected growth rate for the current year is 3.4%, in contrast to the Transportation - Airline industry’s estimated decline of 6.9%. The company gained 56.9% in the last one-year period.

Intrawest Resorts Holdings Inc SNOW is a mountain resort, adventure and real estate company. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings rose 20.5% over the last 60 days. The company’s expected growth rate for the next year is 41.5%, more than the Hotels and Motels industry’s projected gain of 12.2%. The company has climbed 74.9% in the last one year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hilton Grand Vacations Inc HGV is a timeshare company that markets and sells vacation ownership intervals (VOIs), manages resorts in leisure and urban destinations, and operates a points-based vacation club. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings gained 3.3% over the last 60 days. The company’s expected growth rate for the current year is 11%, higher than the Hotels and Motels industry’s projected gain of 0.2%. The company has increased 37.9% in the last one year.

Six Flags Entertainment Corp SIX is a regional theme park operator. The company operates in the theme parks segment. The company operates approximately 19 regional theme and water parks. Six Flags Entertainment has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings advanced 0.5% over the last 60 days. The company’s expected growth rate for the current year is 60.9%, better than the Leisure and Recreation Services industry’s projected gain of 16.8%. The company has improved 3.6% in the last one-year period.

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Southwest Airlines Company (LUV): Free Stock Analysis Report
 
SkyWest, Inc. (SKYW): Free Stock Analysis Report
 
Intrawest Resorts Holdings, Inc. (SNOW): Free Stock Analysis Report
 
Hilton Grand Vacations Inc. (HGV): Free Stock Analysis Report
 
Six Flags Entertainment Corporation New (SIX): Free Stock Analysis Report
 
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