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Royal Caribbean (RCL) Up 64% in a Year: More Upside Left?
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Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from solid demand for cruising and acceleration in booking volumes. Also, strong pricing (on closer-in-demand) and solid onboard spending bode well.
The company emphasizes on new ship additions and technological innovation to boost its offering and deliver superior yields and margins.
In the past year, shares of Royal Caribbean have gained 63.5% compared with the industry’s 3% growth. The price performance was backed by solid earnings surprise history. Royal Caribbean’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters. Earnings estimates for 2023 and 2024 have moved up 6.5% and 9.1% in the past 30 days, respectively. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), suggesting robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Let’s delve deeper.
Strong Booking Trends: The company experienced continuous growth in booking volume during the second and third quarters of 2023, especially for sailings in 2023 and 2024. Third-quarter bookings surpassed those of 2019, with a solid performance in North America and European sailings. The company witnessed increased consumer spending onboard and pre-cruise purchases, exceeding 2019 levels due to higher participation at elevated prices.
The company stated that the positive momentum will extend into 2024, with booked load factors and rates surpassing previous records. As of Sep 30, 2023, RCL held $5 billion in customer deposits, up from $4.2 billion on Dec 31, 2022. With the full fleet resumption and high-priced load factors, the company expects customer deposits to follow typical seasonality in the coming periods. In 2023, solid guest generation is anticipated from the North America region.
New Ship Addition: The company emphasizes on innovation in new ships and onboard experiences to set itself apart and achieve higher yields and margins. In the first half of 2023, RCL introduced three new ships aligned with this strategy, expected to boost yields from 2024. In August 2023, the company unveiled Silversea's Silver Nova, the first in the new Evolution class. In the fourth quarter of 2023, RCL expects to receive the delivery of the Icon of the Seas and Celebrity Ascent. As of Sep 30, 2023, the company has 56 new ships on order, scheduled for delivery by 2028.
For 2024, RCL plans to introduce Utopia of the Seas in the middle of the year. Utopia represents the first Oasis-class ship dedicated to short Caribbean cruises, aligning with the company's strategy to compete against land-based vacation options. The goal is to attract new-to-cruise travelers, thereby narrowing the value gap.
Focus on Innovation: The company utilizes digital tools for marketing, product development, and improving the consumer experience. This includes revamped websites, new vacation packaging capabilities and enhanced mobile app support along with increased onboard bandwidth. Royal Caribbean introduces new technological capabilities under its Project Excalibur. The company rolled out a smartphone app to improve convenience and better serve guests, benefitting over 60% of its current guests. Streaming WiFi, tailored destinations, and ship upgrades further contribute to its success.
Long-term Goals: The company introduced the Trifecta Program in the third quarter of 2022, outlining its financial goals for 2025. The initiative targets triple-digit adjusted EBITDA per APCD, surpassing the 2019 record of $87. It aims for double-digit adjusted EPS, exceeding the 2019 record of $9.54 and return on invested capital (ROIC) in the teens by the end of 2025. These goals stem from underlying strategies, demographic trends, moderate capacity and yield growth and cost discipline. RCL expects to achieve record EBITDA per APCD and ROIC in 2023, progressing toward its objectives.
Adtalem Global Education Inc. (ATGE - Free Report) currently sports a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 19.3%, on average. The stock has surged 40.1% in the past year.
The Zacks Consensus Estimate for ATGE’s 2024 sales and EPS suggests growth of 3.4% and 3.3%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) currently sports a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 20.8%, on average. The stock has gained 9.2% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates growth of 45.9% and 132.1%, respectively, from the year-ago period’s levels.
Hilton Worldwide Holdings Inc. (HLT - Free Report) has a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 11.3%, on average. The stock has gained 16.6% in the past year.
The Zacks Consensus Estimate for HLT’s 2023 sales and EPS suggests increases of 15.8% and 24.1%, respectively, from the year-ago period’s levels.
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Royal Caribbean (RCL) Up 64% in a Year: More Upside Left?
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from solid demand for cruising and acceleration in booking volumes. Also, strong pricing (on closer-in-demand) and solid onboard spending bode well.
The company emphasizes on new ship additions and technological innovation to boost its offering and deliver superior yields and margins.
In the past year, shares of Royal Caribbean have gained 63.5% compared with the industry’s 3% growth. The price performance was backed by solid earnings surprise history. Royal Caribbean’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters. Earnings estimates for 2023 and 2024 have moved up 6.5% and 9.1% in the past 30 days, respectively. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), suggesting robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Let’s delve deeper.
Strong Booking Trends: The company experienced continuous growth in booking volume during the second and third quarters of 2023, especially for sailings in 2023 and 2024. Third-quarter bookings surpassed those of 2019, with a solid performance in North America and European sailings. The company witnessed increased consumer spending onboard and pre-cruise purchases, exceeding 2019 levels due to higher participation at elevated prices.
The company stated that the positive momentum will extend into 2024, with booked load factors and rates surpassing previous records. As of Sep 30, 2023, RCL held $5 billion in customer deposits, up from $4.2 billion on Dec 31, 2022. With the full fleet resumption and high-priced load factors, the company expects customer deposits to follow typical seasonality in the coming periods. In 2023, solid guest generation is anticipated from the North America region.
New Ship Addition: The company emphasizes on innovation in new ships and onboard experiences to set itself apart and achieve higher yields and margins. In the first half of 2023, RCL introduced three new ships aligned with this strategy, expected to boost yields from 2024. In August 2023, the company unveiled Silversea's Silver Nova, the first in the new Evolution class. In the fourth quarter of 2023, RCL expects to receive the delivery of the Icon of the Seas and Celebrity Ascent. As of Sep 30, 2023, the company has 56 new ships on order, scheduled for delivery by 2028.
For 2024, RCL plans to introduce Utopia of the Seas in the middle of the year. Utopia represents the first Oasis-class ship dedicated to short Caribbean cruises, aligning with the company's strategy to compete against land-based vacation options. The goal is to attract new-to-cruise travelers, thereby narrowing the value gap.
Focus on Innovation: The company utilizes digital tools for marketing, product development, and improving the consumer experience. This includes revamped websites, new vacation packaging capabilities and enhanced mobile app support along with increased onboard bandwidth. Royal Caribbean introduces new technological capabilities under its Project Excalibur. The company rolled out a smartphone app to improve convenience and better serve guests, benefitting over 60% of its current guests. Streaming WiFi, tailored destinations, and ship upgrades further contribute to its success.
Long-term Goals: The company introduced the Trifecta Program in the third quarter of 2022, outlining its financial goals for 2025. The initiative targets triple-digit adjusted EBITDA per APCD, surpassing the 2019 record of $87. It aims for double-digit adjusted EPS, exceeding the 2019 record of $9.54 and return on invested capital (ROIC) in the teens by the end of 2025. These goals stem from underlying strategies, demographic trends, moderate capacity and yield growth and cost discipline. RCL expects to achieve record EBITDA per APCD and ROIC in 2023, progressing toward its objectives.
Other Key Picks
Some other top-ranked stocks from the Zacks Consumer Discretionary sector are:
Adtalem Global Education Inc. (ATGE - Free Report) currently sports a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 19.3%, on average. The stock has surged 40.1% in the past year.
The Zacks Consensus Estimate for ATGE’s 2024 sales and EPS suggests growth of 3.4% and 3.3%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) currently sports a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 20.8%, on average. The stock has gained 9.2% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates growth of 45.9% and 132.1%, respectively, from the year-ago period’s levels.
Hilton Worldwide Holdings Inc. (HLT - Free Report) has a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 11.3%, on average. The stock has gained 16.6% in the past year.
The Zacks Consensus Estimate for HLT’s 2023 sales and EPS suggests increases of 15.8% and 24.1%, respectively, from the year-ago period’s levels.