Equity Briefing: Travel stocks, Paychex and Carmax

Airlines and travel stocks are in focus this morning after the UK government expanded the number of countries on the green list for travel, Paychex is expected to report strong growth with results before the US bell today, while Carmax will follow after markets close.

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Travel stocks

Travel stocks will be in focus today following the UK government’s update to its restrictions on international travel late yesterday. This will bring airlines like easyJet, IAG, Ryanair and Wizz Air onto the radar today, as well as other stocks that rely heavily on tourism like InterContinental Hotels.

A total of 16 places have been added to the UK’s green travel list from next Wednesday, including the Balearic Islands, Malta, a number of Caribbean islands and some British Overseas Territories like Bermuda.

The government confirmed it is planning to allow fully-vaccinated people to travel to amber list countries without the need to quarantine in the future, but said it would take place in phases.

Although the addition of popular holiday hotspots like Ibiza and Majorca will be welcomed by the industry, it is not enough to turn around its fortunes. British Airways warned the sector could not afford ‘another missed summer’ while easyJet said the timetable ‘simply isn’t ambitious enough’.

Plus, while the UK may be eager to ease travel rules when it can, other nations don’t share the same attitude. German chancellor Angela Merkel has argued Brits should have to quarantine on arrival in any European country, reminding us that international travel is a two-way street.

Paychex

Paychex will release fourth-quarter and full-year results covering the periods to the end of May before US markets open later today.

The company, which provides a variety of HR resources through its software such as payroll and insurance services, has focused more on adapting to the challenges posed by the pandemic and helping its customers over the last year.

Revenue and profits have suffered minor decreases but investors will hope recent operational improvements can start to translate to the financials as it enters the new financial year. Client retention is at an all-time high, demonstrating the strength of its product.

Analysts are expecting fourth-quarter revenue to rise to $980.5 million from $915.1 million the year before and for adjusted EPS to bump up to $0.67 from $0.61.

However, revenue and earnings are forecast to be lower over the full-year, with Wall Street anticipating the topline will dip to $4.00 billion from $4.04 billion and adjusted EPS of $2.97 versus $3.04 the year before.

Carmax

Carmax will be releasing first-quarter results covering the three months to the end of May before the NYSE opens today.

The company, which provides ‘hassle-free’ sales of used cars, saw revenue and earnings fall last year as the pandemic caused disruption for the business but things have improved as restrictions have eased, and consumers are flush with cash thanks to the latest round of stimulus cheques and tax refunds.

Although the company has started to bounce back and the outlook has improved since last year, investors will want to see evidence that things are looking good going forward as vaccines are rolled-out and life starts to return to normal.

Analysts are expecting a big jump in revenue and earnings compared to the previous year as it comes up against weak comparatives due to the first-quarter of 2020 being hit by the pandemic. Quarterly revenue is expected to almost double to $6.24 billion from $3.22 billion the year before, with EPS expected to come in at $1.66 compared to just $0.03.

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