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Royal Caribbean (RCL) Down 38% YTD: Can It Revive in 2023?
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The Zacks Leisure and Recreation Services industry struggled in 2022 and Royal Caribbean Cruises Ltd. (RCL - Free Report) is no exception. Year to date, the stock is down 37.6%, compared with the industry’s decrease of 40.9%. The decline can be primarily attributed to COVID-19 and inflationary pressure.
Negative investor sentiments were witnessed as the company cited inflationary and supply-chain challenges (related to fuel and food costs) and transitory costs related to health and safety protocols. The company anticipates the hurdles to weigh on its 2022 earnings.
For fourth-quarter 2022, net cruise costs, excluding fuel per APCD, are likely to increase by low to mid-single digits in comparison to 2019 levels. These includs expected transitory costs related to health protocols and one-time lagging costs related to fleet ramp-up. The company anticipates inflationary and supply-chain challenges to persist for some time.
Can the Stock Stage a Comeback in 2023?
This Zacks Rank #3 (Hold) company’s sales and earnings in fiscal 2023 are expected to witness growth of 43.6% and 138.3% year over year, respectively. In the past 60 days, earnings estimates for 2023 have witnessed upward revisions of 25% to $2.95 per share.
In 2023, the company is likely to benefit from the addition of new ships. In 2023, the company has three ships scheduled for delivery — Icon of the Seas, Celebrity Ascent and Silver Nova.
The company stated that Icon will have eight distinct neighborhoods and that its stateroom configuration will allow load factors to be accretive to the overall portfolio. Also, it reported a solid market response in terms of bookings. The company anticipates the ship to be significantly accretive to its key financial metrics.
Image Source: Zacks Investment Research
During third-quarter 2022, the company unveiled a three-year financial performance initiative, Trifecta Program, thereby articulating longer-term financial objectives. The program emphasizes on financial coordinates, including adjusted EBITDA per APCD, adjusted EPS and ROIC, with an intent to achieve it by 2025 end. Under this program, the company expects to achieve a triple-digit adjusted EBITDA per APCD, exceeding the earlier recorded adjusted EBITDA per APCD of $87 in 2019.
The company also expects to achieve double-digit adjusted earnings per share, exceeding the earlier recorded adjusted earnings per share of $9.54 in 2019. The company anticipates achieving a return on invested capital in the teens by the end of 2025. RCL intends to achieve the metrics on account of its underlying strategies, robust secular and demographic trends, moderate capacity growth, moderate yield growth and strong cost discipline.
Improvement in booking is likely to aid the company’s performance in 2023. During the third quarter, the company reported accelerating demand for sailings in 2023. It stated that booking volumes for 2023 doubled during the third quarter compared with the second quarter of 2022. As of Sep 30, the company had nearly $3.8 billion in customer deposits.
Hilton Grand Vacations currently sports a Zacks Rank #1 (Strong Buy). HGV has a trailing four-quarter earnings surprise of 3.7%, on average. The stock has declined 27.4% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HGV’s 2023 sales and earnings per share (EPS) indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average. The stock has gained 18.4% in the past year.
The Zacks Consensus Estimate for RICK’s 2023 sales and EPS indicates growth of 14.6% and 15.9%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has declined 7.3% in the past year.
The Zacks Consensus Estimate for H’s 2023 sales and EPS indicates a surge of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.
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Royal Caribbean (RCL) Down 38% YTD: Can It Revive in 2023?
The Zacks Leisure and Recreation Services industry struggled in 2022 and Royal Caribbean Cruises Ltd. (RCL - Free Report) is no exception. Year to date, the stock is down 37.6%, compared with the industry’s decrease of 40.9%. The decline can be primarily attributed to COVID-19 and inflationary pressure.
Negative investor sentiments were witnessed as the company cited inflationary and supply-chain challenges (related to fuel and food costs) and transitory costs related to health and safety protocols. The company anticipates the hurdles to weigh on its 2022 earnings.
For fourth-quarter 2022, net cruise costs, excluding fuel per APCD, are likely to increase by low to mid-single digits in comparison to 2019 levels. These includs expected transitory costs related to health protocols and one-time lagging costs related to fleet ramp-up. The company anticipates inflationary and supply-chain challenges to persist for some time.
Can the Stock Stage a Comeback in 2023?
This Zacks Rank #3 (Hold) company’s sales and earnings in fiscal 2023 are expected to witness growth of 43.6% and 138.3% year over year, respectively. In the past 60 days, earnings estimates for 2023 have witnessed upward revisions of 25% to $2.95 per share.
In 2023, the company is likely to benefit from the addition of new ships. In 2023, the company has three ships scheduled for delivery — Icon of the Seas, Celebrity Ascent and Silver Nova.
The company stated that Icon will have eight distinct neighborhoods and that its stateroom configuration will allow load factors to be accretive to the overall portfolio. Also, it reported a solid market response in terms of bookings. The company anticipates the ship to be significantly accretive to its key financial metrics.
Image Source: Zacks Investment Research
During third-quarter 2022, the company unveiled a three-year financial performance initiative, Trifecta Program, thereby articulating longer-term financial objectives. The program emphasizes on financial coordinates, including adjusted EBITDA per APCD, adjusted EPS and ROIC, with an intent to achieve it by 2025 end. Under this program, the company expects to achieve a triple-digit adjusted EBITDA per APCD, exceeding the earlier recorded adjusted EBITDA per APCD of $87 in 2019.
The company also expects to achieve double-digit adjusted earnings per share, exceeding the earlier recorded adjusted earnings per share of $9.54 in 2019. The company anticipates achieving a return on invested capital in the teens by the end of 2025. RCL intends to achieve the metrics on account of its underlying strategies, robust secular and demographic trends, moderate capacity growth, moderate yield growth and strong cost discipline.
Improvement in booking is likely to aid the company’s performance in 2023. During the third quarter, the company reported accelerating demand for sailings in 2023. It stated that booking volumes for 2023 doubled during the third quarter compared with the second quarter of 2022. As of Sep 30, the company had nearly $3.8 billion in customer deposits.
Key Picks
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hilton Grand Vacations Inc. (HGV - Free Report) , RCI Hospitality Holdings, Inc. (RICK - Free Report) and Hyatt Hotels Corporation (H - Free Report) .
Hilton Grand Vacations currently sports a Zacks Rank #1 (Strong Buy). HGV has a trailing four-quarter earnings surprise of 3.7%, on average. The stock has declined 27.4% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HGV’s 2023 sales and earnings per share (EPS) indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average. The stock has gained 18.4% in the past year.
The Zacks Consensus Estimate for RICK’s 2023 sales and EPS indicates growth of 14.6% and 15.9%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has declined 7.3% in the past year.
The Zacks Consensus Estimate for H’s 2023 sales and EPS indicates a surge of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.