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Royal Caribbean Now a Buy: Is It Part of Your Portfolio?

BYD RCL MTN SKIS

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On Oct 4, Royal Caribbean Cruises Ltd. (RCL - Free Report) was upgraded by a notch to a Zacks Rank #2 (Buy).

The company enjoys significant brand recognition and its strong relationship with travel agents makes it one of the leading cruise companies in the U.S.
    
Asia itineraries have been mostly performing strong over the past few quarters. Meanwhile, overall demand for cruising in North America continues to be robust. Notably, the Caribbean, Alaska and Bermuda itineraries are all poised to have a strong year and produce solid yield improvements in 2016.

Moreover, the company has been experiencing strong demand for 2016 sailings, with bookings consistently trending ahead of the prior-year levels. Given this situation the company is required to increase its capacity. With fleet launches – the debut of the Ovation of the Seas, Harmony of the Seas along with Mein Schiff 5 for its joint venture, TUI Cruises – the company expects to meet this requirement comfortably.

Recently, the company raised its quarterly dividend by 28%. This increase marked the company’s fifth consecutive year of dividend hike and reflects its financial stability and substantial profitability.

ROYAL CARIBBEAN Price and Consensus

 

ROYAL CARIBBEAN Price and Consensus | ROYAL CARIBBEAN Quote

Meanwhile, profitability improvement initiatives undertaken by the company in order to generate long-term cost savings, bode well. The company also launched its Double-Double program in 2014 wherein it aims to double 2014 earnings per share by 2017, bring the company’s return on capital to double-digit percentages, and improve revenue yields, control costs and moderate capacity growth.

However, currently, the company is incurring higher costs for its restructuring initiatives and consolidation efforts. Though these efforts are putting pressure on near-term margins and earnings, they are expected to benefit the company over the long run.

Nonetheless, macroeconomic concerns in Royal Caribbean’s international markets like Europe and China, and currency headwinds, might adversely impact the company.

Stocks to Consider

Other stocks in this sector worth considering include Vail Resorts Inc. (MTN - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and Peak Resorts, Inc. (SKIS - Free Report) . While Vail Resorts sports a Zacks Rank #1 (Strong Buy), Boyd Gaming and Peak Resorts carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vail Resorts’ earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 2.22%. Further, for full-year 2016, EPS is expected to grow 27.5%.

The Zacks Consensus Estimate for Boyd Gaming’s 2016 earnings climbed 3.8% over the last 60 days. The company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 39.87%.

The Zacks Consensus Estimate for Peak Resorts’ fiscal 2017 earnings moved up 27.8% over the last 60 days. Further, for full-year 2016, EPS is expected to grow a momentous 200%.

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