While some hard-hit industries have seen some level of recovery as the economy takes a phased approach to reopening, many companies need to operate at full capacity to maintain their business and move toward expansion. But these plans have been put on hold until the health crisis is put in check.
Sharp investors should be vigilant of the economic consequences that certain companies are facing and how they influence a stock's performance, meaning you should stay on top of your stock portfolio and manage risk. Here are five stocks to sell or stay away from this month:
-- Royal Caribbean (ticker: RCL)
-- Avis Budget Group (CAR)
-- CBL Properties (CBLAQ)
-- Shake Shack (SHAK)
-- Dillard's (DDS)
Royal Caribbean (RCL)
The cruise line announced that it will be extending the suspension of its cruises for the remainder of 2020 and will have a plan to resume on Jan. 1. The Centers for Disease Control and Prevention issued a third "no sail" order for all cruise ships on Sept. 30 to take preventative measures to contain the spread of COVID-19. The cruise line continues its operations in Singapore with limited capacity.
In RCL's latest third-quarter earnings results, the company reported a net loss of $1.3 billion, or $6.29 per share, compared with net income of $883.2 million, or $4.20 per share, in the prior year. Monthly cash burn is estimated to be between $250 million and $290 million, and management is focusing on securing its cash position.
Royal Caribbean has not been able to provide clear guidance on its outlook for the rest of the year or into 2021 until there is public health guidance and a resumption of cruise operations. RCL stock has lost more than 57% year to date, with a current market value of around $57.
Avis Budget Group (CAR)
The auto rental service has been struggling during the health crisis as traveling has halted and consumers are saving money by forgoing vacations. Avis started the year with revenues up 9% in the first quarter, but consequences from the pandemic quickly set in -- with the company reporting a net loss of $481 million and a 67% decrease in total revenues in the second quarter of this year.
The car rental company saw some positive revenue in the third quarter with a net income of $45 million, as reported last week, but business is still down 44% compared with last year. Investors didn't appear impressed by the results since CAR stock fell more than 16% following the release.
The company has taken steps to increase its cash position while reducing expenses, which has had the positive effect of removing $1 billion worth of costs. Looking into the fourth quarter, the company expects seasonal declines with travel at all-time lows, meaning demand for rental cars stands to remain low.
CAR stock is down 12% year to date, with a current market value of roughly $28.
CBL Properties (CBLAQ)
This real estate investment trust, or REIT, headquartered in Chattanooga, Tennessee, owns, manages and develops a portfolio of properties, particularly shopping centers and malls across the country. Some of CBL's major shopping center and outlet tenants host big retailers that have been hit financially this year.
CBL experienced a net loss of $81.5 million, or 42 cents per diluted share, in the second quarter compared with last year's net loss of $35.4 million, or 20 cents per diluted share, for the same period. The loss was attributed to the closure of many of these properties due to government mandates as a result of the pandemic. The company predicts business will continue to be impacted in the quarters ahead.
"The pandemic has accelerated the number of tenet bankruptcies, resulting in an expectation of additional store closures and lost rent through the remainder of the year," says Stephen Lebovitz, CEO of CBL & Associates Properties.
The REIT recently filed for Chapter 11 bankruptcy to focus on debt restructuring and recapitalization. Yesterday, CBL announced its stock will be suspended from trading on the New York Stock Exchange and trade in the over-the-counter market. The company plans to operate business as usual.
Shake Shack (SHAK)
Investors may want to stay away from Shake Shack this month. The fast-food chain reported a loss of 11 cents per diluted share in its third quarter, compared with a gain of 26 cents per diluted share during the same time last year.
In the health crisis, restaurants must operate with lower capacity according to public health guidelines, impacting their profitability and leaving restaurants to rely on digital services, which accounted for 60% of total Shack sales in the third quarter. This activity has been helpful for business, but looking ahead, it may not be sustainable.
SHAK has been working toward recovering from incurred losses earlier in the year. Total revenue for the third quarter decreased by 17.3%, an improvement from last quarter's 39.9% decline.
Shake Shack hasn't provided guidance on performance estimates through the rest of the year. According to the company, the recovery of its business depends on "the return of (patrons to) the high traffic areas that contributed to many of the strongest Shack sales, including those most reliant on travel, schools, offices and major gatherings as well as fully open dining rooms," and the timeline on that is highly uncertain amid the pandemic.
There may be a buying opportunity for SHAK in the future. Right now, however, fundamentals appear to be weak. SHAK stock is up nearly 18% year to date, with a current market value of around $70.
Dillard's, the department store chain headquartered in Little Rock, Arkansas, with more than 250 stores across America, has been working through losses this year.
The department store's returns are below average. In the second-quarter, DDS reported a loss of $8.6 million, or 37 cents per share. Total retail sales of $893.2 million decreased by about 35%, slightly improving from the company's losses in its first-quarter retail sales, according to the earnings report. The depressed earnings and sales were a result of store closures during the health crisis. The company also expects a net operating loss for the fiscal year.
DDS repurchased $14.3 million worth of its common shares in the second quarter, after a $62 million share repurchase in this year's first quarter to likely boost its financial ratios.
Dillard's competitor, Burlington Stores ( BURL), experienced similar losses -- with a 39% decline in total sales in the second quarter. Slightly larger retail competitor Macy's ( M) saw a similar decline. Overall, retailers have been hit hard, and the industry may need to become more innovative to improve its condition.
DDS stock is down 37% year to date, with a current market value of around $45 per share.