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3 Stocks to Watch From Leisure & Recreation Services Industry
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The Zacks Leisure and Recreation Services industry is benefiting from optimizing business processes, consistent strategic partnerships and digital initiatives. The robust demand for concerts, improving bookings for cruise operators and higher per capita spending at theme parks are supporting the industry. Industry players like Royal Caribbean Cruises Ltd. (RCL - Free Report) , Live Nation Entertainment, Inc. (LYV - Free Report) and AMC Entertainment Holdings, Inc. (AMC - Free Report) are likely to gain in their respective fields owing to the factors mentioned above.
Industry Description
The Zacks Leisure and Recreation Services industry comprises various recreation providers, such as cruise, entertainment and media owners, golf-related leisure and entertainment venue businesses, theme park makers, resort operators and event organizers. Some industry players have ski and sports businesses, while some operate health and wellness centers onboard cruise ships and at destination resorts. Many companies are engaged in hospitality and related businesses. A few of the industry participants also provide weight management products and services. These companies primarily thrive on overall economic growth, which fuels consumer demand for products. Demand, highly dependent on business cycles, is driven by a healthy labor market, rising wages and a growing disposable income.
3 Trends Shaping the Leisure & Recreation Services Industry's Future
U.S. Economy Gradually Getting Back on Track: The Federal Reserve decided to keep interest rates unchanged, and Jerome Powell, the head of the U.S. central bank, mentioned that the unprecedented shift toward tighter monetary policy is probably finished. This comes as inflation is decreasing more rapidly than anticipated and the possibility of considering reductions in borrowing costs coming “into view.”
Robust Demand Aids Cruise Operators: The cruise industry is benefiting from strong demand for cruising and accelerating booking volumes. The industry is benefiting from solid bookings concerning North American and European sailings. Also, strong pricing (on closer-in-demand) and solid onboard spending bode well for the industry. However, the cruise operators’ operations are likely to be influenced by the uncertainties related to the Russian invasion of Ukraine. Geopolitical developments have pushed fuel curves higher.
Theme Park Operators & Live Entertainment Companies Bouncing Back: The theme park industry has been benefiting from robust demand. Theme park operators have been gaining from improving visitation. Consumer spending at theme parks continues to rise. Live entertainment firms have benefited from pent-up live event demand and robust ticket sales.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Leisure and Recreation Services industry is grouped within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #90, which places it in the top 36% of 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the top 50% of the Zacks-ranked industries results from a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in the group’s earnings growth potential. Since Sep 30, 2023, the industry's earnings estimates for 2023 have increased 11.1%.
Before we present a few stocks that investors can consider, let’s analyze the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Leisure and Recreation Services industry has underperformed the Zacks S&P 500 composite but has outperformed its sector in the past year. Stocks in the industry have gained 14.9% in the past year compared with the broader sector’s increase of 13.5%. The S&P 500 has risen 19.7% in the said time frame.
One-Year Price Performance
Valuation
On the basis of the forward 12-month EV/EBITDA (Enterprise Value/Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing debt-laden leisure service stocks, the industry trades at 54.43X compared with the S&P 500’s 19.8X and the sector’s 13.09X. In the past five years, the industry has traded as high as 59.36X and as low as 6.20X, with the median being 9.48X, as the charts below show.
EV/EBITDA Ratio (F12M) Compared With S&P
3 Leisure and Recreation Services Stocks to Keep an Eye On
Royal Caribbean Cruises: Based in Miami and incorporated in 1985, Royal Caribbean Cruises is a cruise company. It has been benefiting from solid demand for cruising and acceleration in booking volumes. Also, the emphasis on strong pricing (on closer-in-demand) bodes well. The company stated that the momentum has continued into 2024, with booked load factors and rates surpassing those of all previous years. Given the full fleet resumption and load factors at high prices, it expects customer deposits to return to typical seasonality in the upcoming periods.
Shares of this Zacks Rank #1 (Strong Buy) company have surged 120.4% in the past year. In 2023, its sales and earnings are expected to witness growth of 57.7% and 187.9%, respectively, from the prior year’s reported levels. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: RCL
Live Nation Entertainment: The company has been benefiting from pent-up demand for live events, robust ticket sales and the sponsorship and advertising business. Also, the emphasis on new client and venue additions bodes well. Given the strength in consumer demand and confirmed sponsorship activity (fully committed) at more than $1 billion in revenues, the momentum is likely to persist in the upcoming periods.
Shares of this Zacks Rank #1 company have gained 25.4% in the past year. For 2023, its sales and earnings are expected to grow 28.6% and 132.8%, respectively, from the prior year’s reported levels.
Price and Consensus: LYV
AMC Entertainment: AMC Entertainment is benefiting from attendance growth. As the number and quality of movie titles from the company’s studio partners are notably increasing, movie theatres are seen captivating audiences and driving attendance back to AMC theatres.
Shares of this Zacks Rank #3 (Hold) company have declined 87.8% in the past year. In fiscal 2023, its sales and earnings are expected to witness growth of 23% and 76%, year over year, respectively.
Price and Consensus: AMC
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3 Stocks to Watch From Leisure & Recreation Services Industry
The Zacks Leisure and Recreation Services industry is benefiting from optimizing business processes, consistent strategic partnerships and digital initiatives. The robust demand for concerts, improving bookings for cruise operators and higher per capita spending at theme parks are supporting the industry. Industry players like Royal Caribbean Cruises Ltd. (RCL - Free Report) , Live Nation Entertainment, Inc. (LYV - Free Report) and AMC Entertainment Holdings, Inc. (AMC - Free Report) are likely to gain in their respective fields owing to the factors mentioned above.
Industry Description
The Zacks Leisure and Recreation Services industry comprises various recreation providers, such as cruise, entertainment and media owners, golf-related leisure and entertainment venue businesses, theme park makers, resort operators and event organizers. Some industry players have ski and sports businesses, while some operate health and wellness centers onboard cruise ships and at destination resorts. Many companies are engaged in hospitality and related businesses. A few of the industry participants also provide weight management products and services. These companies primarily thrive on overall economic growth, which fuels consumer demand for products. Demand, highly dependent on business cycles, is driven by a healthy labor market, rising wages and a growing disposable income.
3 Trends Shaping the Leisure & Recreation Services Industry's Future
U.S. Economy Gradually Getting Back on Track: The Federal Reserve decided to keep interest rates unchanged, and Jerome Powell, the head of the U.S. central bank, mentioned that the unprecedented shift toward tighter monetary policy is probably finished. This comes as inflation is decreasing more rapidly than anticipated and the possibility of considering reductions in borrowing costs coming “into view.”
Robust Demand Aids Cruise Operators: The cruise industry is benefiting from strong demand for cruising and accelerating booking volumes. The industry is benefiting from solid bookings concerning North American and European sailings. Also, strong pricing (on closer-in-demand) and solid onboard spending bode well for the industry. However, the cruise operators’ operations are likely to be influenced by the uncertainties related to the Russian invasion of Ukraine. Geopolitical developments have pushed fuel curves higher.
Theme Park Operators & Live Entertainment Companies Bouncing Back: The theme park industry has been benefiting from robust demand. Theme park operators have been gaining from improving visitation. Consumer spending at theme parks continues to rise. Live entertainment firms have benefited from pent-up live event demand and robust ticket sales.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Leisure and Recreation Services industry is grouped within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #90, which places it in the top 36% of 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the top 50% of the Zacks-ranked industries results from a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in the group’s earnings growth potential. Since Sep 30, 2023, the industry's earnings estimates for 2023 have increased 11.1%.
Before we present a few stocks that investors can consider, let’s analyze the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Leisure and Recreation Services industry has underperformed the Zacks S&P 500 composite but has outperformed its sector in the past year. Stocks in the industry have gained 14.9% in the past year compared with the broader sector’s increase of 13.5%. The S&P 500 has risen 19.7% in the said time frame.
One-Year Price Performance
Valuation
On the basis of the forward 12-month EV/EBITDA (Enterprise Value/Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing debt-laden leisure service stocks, the industry trades at 54.43X compared with the S&P 500’s 19.8X and the sector’s 13.09X. In the past five years, the industry has traded as high as 59.36X and as low as 6.20X, with the median being 9.48X, as the charts below show.
EV/EBITDA Ratio (F12M) Compared With S&P
3 Leisure and Recreation Services Stocks to Keep an Eye On
Royal Caribbean Cruises: Based in Miami and incorporated in 1985, Royal Caribbean Cruises is a cruise company. It has been benefiting from solid demand for cruising and acceleration in booking volumes. Also, the emphasis on strong pricing (on closer-in-demand) bodes well. The company stated that the momentum has continued into 2024, with booked load factors and rates surpassing those of all previous years. Given the full fleet resumption and load factors at high prices, it expects customer deposits to return to typical seasonality in the upcoming periods.
Shares of this Zacks Rank #1 (Strong Buy) company have surged 120.4% in the past year. In 2023, its sales and earnings are expected to witness growth of 57.7% and 187.9%, respectively, from the prior year’s reported levels. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: RCL
Live Nation Entertainment: The company has been benefiting from pent-up demand for live events, robust ticket sales and the sponsorship and advertising business. Also, the emphasis on new client and venue additions bodes well. Given the strength in consumer demand and confirmed sponsorship activity (fully committed) at more than $1 billion in revenues, the momentum is likely to persist in the upcoming periods.
Shares of this Zacks Rank #1 company have gained 25.4% in the past year. For 2023, its sales and earnings are expected to grow 28.6% and 132.8%, respectively, from the prior year’s reported levels.
Price and Consensus: LYV
AMC Entertainment: AMC Entertainment is benefiting from attendance growth. As the number and quality of movie titles from the company’s studio partners are notably increasing, movie theatres are seen captivating audiences and driving attendance back to AMC theatres.
Shares of this Zacks Rank #3 (Hold) company have declined 87.8% in the past year. In fiscal 2023, its sales and earnings are expected to witness growth of 23% and 76%, year over year, respectively.
Price and Consensus: AMC