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Zacks Industry Outlook Highlights Royal Caribbean Cruises, Manchester United and Bluegreen Vacations Holding

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For Immediate Release

Chicago, IL – July 5, 2023 – Today, Zacks Equity Research discusses Royal Caribbean Cruises Ltd. (RCL - Free Report) , Manchester United plc (MANU - Free Report) and Bluegreen Vacations Holding Corp. .

Industry: Leisure & Recreation Services

Link: https://www.zacks.com/commentary/2115941/3-stocks-to-buy-from-the-promising-leisure-recreation-services-industry

The Zacks Leisure and Recreation Services industry is benefiting from the optimization of 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., Manchester United plc and Bluegreen Vacations Holding Corp. are likely to gain in their respective fields owing to the factors mentioned above. However, the industry has been bearing the brunt of high costs and a slow U.S. economy.

Industry Description

The Zacks Leisure and Recreation Services industry comprises a wide range of recreation providers, such as cruise, entertainment and media owners, golf-related leisure and entertainment venue business, 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, which is 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

Robust Demand Aid Cruise Operators: The cruise industry is benefiting from strong demand for cruising, accelerating booking volumes and the relaxation in COVID-related protocols. However, the closure of cruise operations in China is hurting the industry. The cruise operators' operations are likely to be influenced by the uncertainty related to the Russian invasion of Ukraine. Geopolitical developments have pushed fuel curves higher. Due to the war, most cruise operators have decided to withdraw all activity in Russia.

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 rising. Live entertainment firms have been benefiting from pent-up demand for live events and robust ticket sales.

Concerns of Slowing Global Economy & High Inflation: A slowdown in the global economy is likely to hurt the industry. Concerns about a global slowdown and a possible recession loom large over the stock market. Inflation in the United States is the biggest challenge for the economy. The U.S. consumer inflation rate fell to 4.0% in May 2023, marking the lowest since March 2021 and slightly below market expectations of 4.1%. Yet, numbers are far from the Federal Reserve's ambitious target of 2% for a strong economy. Inflationary cost increases in labor, compensation, healthcare, freight and rent are leading to higher expenses.

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 #67, which places it in the top 27% of 252 Zacks industries.

The group's Zacks Industry Rank, which is basically 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 2 to 1.

The industry's position in the bottom 50% of the Zacks-ranked industries is the result of a negative 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 Mar 31, 2023, the industry's earnings estimates for 2023 have increased 22.2%.

Before we present a few stocks that investors can consider, let's analyze the industry's recent stock-market performance and valuation picture.

Industry Outperforms the S&P 500

The Zacks Leisure and Recreation Services industry has outperformed the Zacks S&P 500 composite and its sector in the past year. Stocks in the industry have collectively increased 29.2% in the past year compared with the broader sector's increase of 10.2%. The S&P 500 has risen 16.4% in the said time frame.

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 53.01X compared with the S&P 500's 19.78X and the sector's 13.09X. In the past five years, the industry has traded as high as 57.7X and as low as 6.03, with the median being 9.23X.

3 Leisure and Recreation Services Stocks Worth Betting On

Royal Caribbean Cruises: Based in Miami and incorporated in 1985, Royal Caribbean Cruises is a cruise company. The company is benefiting from the strong demand for Caribbean itineraries, solid close-in bookings at higher prices and the continued strength of onboard spend. Considering the extension of the WAVE season and solid pent-up demand, the company raised its 2023 guidance.

Shares of this Zacks Rank #1 (Strong Buy) company have surged 193.9% in the past year. In 2023, the company's sales and earnings are expected to witness growth of 48.7% and 162.9%, respectively, from the prior year's expected levels. You can see the complete list of today's Zacks #1 Rank stocks here.

Manchester United: The company owns and operates a professional sports team in the U.K. The company is gaining from a rise in commercial and matchday revenues.

Shares of this Zacks Rank #2 company have surged 121.6% in the past year. In 2023, the company's sales are expected to witness a growth of 3.9% from the prior year's expected levels.

Bluegreen Vacations: Headquartered in Boca Raton, FL, the company operates as vacation ownership. Bluegreen Vacations is benefiting from system-wide sales of vacation ownership interests ("VOIs") and record sales of vacation packages. The company has been gaining from its "Bluegreen Renewal" initiative — a company-wide effort to revive sales, revenue growth and efficiency. The Bluegreen Renewal initiative has been driving the company's average sales price per transaction and credit qualified guests. A rise in occupancy bodes well.

Shares of this Zacks Rank #2 company have increased 39.6% in the past year. In fiscal 2023, the company's sales and earnings are expected to witness growth of 3.6% and 17.6%, year over year, respectively.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance  for information about the performance numbers displayed in this press release.


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