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Royal Caribbean (RCL) Strong on Initiatives & Bookings Trend
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On May 22, we issued an updated research report on global cruise vacation company Royal Caribbean Cruises Ltd. (RCL - Free Report) .
Last month, the company posted mixed first-quarter 2017 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same. Meanwhile, Royal Caribbean now anticipates earnings in the band of $7 to $7.20 per share for full-year 2017, up from the earlier guided range of $6.90–$7.10.
Notably, this Zacks Rank #2 (Buy) company’s shares have outperformed the Zacks categorized Leisure & Recreation Services industry in the past six months. The stock surged 28.4% outpacing the industry’s gain of 14.5% during the same period.
In fact, the company continues to reflect strength in several areas and is thus expected to continue performing well in the quarters ahead.
Key Growth Drivers
Strong Brand Recognition: Serving over five million passengers annually, Royal Caribbean enjoys significant brand recognition, while its strong relationship with travel agents makes it one of the leading cruise companies in the U.S. Given the strength and diversity of its brands and itineraries, the company has been able to successfully capture potential and repeat cruise vacationers, and enjoys immense popularity among cruisers.
Demand Across Geographies & Capacity Growth: Royal Caribbean has been delivering solid results backed by strong booking trends and capacity growth.
The company’s Asia-Pacific itineraries have been mostly performing strongly over the past few quarters. Indeed, each of the company’s China, Australia and Southeast Asia itineraries are booked higher than last year in load factor. Meanwhile, overall demand for cruising in North America continues to be solid, and the Caribbean and Alaska itineraries are all poised to have a strong year and produce solid yield improvements in 2017.
Furthermore, demand for European sailings has been particularly strong from North America. Consequently, these itineraries are booked at significantly higher average-per-diems (APD) and load factor than same time last year.
In fact, currently, the company’s 2017 itineraries are booked ahead of last year in both occupancy and pricing, with roughly 15% fewer guests left to book than at this point last year.
Given the consistent increase in bookings, the company has been increasing its capacity. The majority of the capacity growth has been recorded in North America, with the remaining mostly in the Asia Pacific region. Additionally, strong booking trends witnessed for new ships launched by the company should further drive growth.
Recently, Celebrity Cruises—one of three brands in the Royal Caribbean family—announced a new category of ship, Edge-class. These ships are dynamic, innovative and beautiful with unique features. Notably, the first ship from the new Edge Class of ships will be Celebrity Edge. We believe this transformational ship is thus poised to attract customers after its launch in Dec 2018.
Reduced Costs Given Profitability Initiatives: Royal Caribbean has been undertaking profitability improvement initiatives aimed at generating long-term cost savings. The company has now entered the final phase of its Double-Double program launched in 2014. We note that that the program has mostly done what it set out to do – bookings are at record levels, dividends are at an all-time high, costs have been well managed and guest satisfaction has improved.
Other initiatives undertaken to reduce costs include carrying out home porting from secondary cities for some of its bigger vessels, improving fuel efficiency of ships to reduce fuel costs and using fuel swaps to mitigate volatility in fuel prices.
Technological Innovation: The company has been deploying technology which includes revamped websites, new vacation packaging capabilities, support for mobile apps, increased bandwidth onboard and streaming WiFi. With busier customers preferring more of digital devices that help to save time, introduction of superior Internet bandwidth, online check-in, radio-frequency identification technology accompanied with the Royal iQ app at Quantum of the Seas, Anthem of the Seas, Ovation of the Seas and Harmony of the Seas should continue to increase occupancy.
Since 2014, the company has added over 1,000 berths, 24 restaurants, seven bars, refreshed its retail spaces fleet wide and added boutiques such as Kate Spade, Michael Kors and Tiffany. All of these add to enhance customer experiences.
Bottom Line
Does this mean that the company has been lying on a bed of roses? Well, not really!
Adverse forex translations, rise in fuel prices along with lingering global uncertainties in certain international markets have been keeping growth at check. Moreover, the company is incurring higher costs for its restructuring initiatives and consolidation efforts of late. Though these efforts are expected to benefit the company over the long run, these would put pressure on margins and earnings in the near term.
Additionally, the company faces competition from other cruise operators including Carnival Corporation (CCL - Free Report) and Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) .
Despite the headwinds, Royal Caribbean is well poised for growth given its strong fundamentals, strong bookings trend and various strategic initiatives.
Notably, over the last 60 days, the Zacks Consensus Estimate for Royal Caribbean’s current quarter’s earnings has moved up 15.6%, reflecting seven upward revisions versus one downward. Also, current year’s earnings estimates have inched up 2.6%, on the back of nine upward revisions versus no downward revision. All these positive earnings estimate revisions testifies the unwavering confidence that analysts have in the company and further adds to the optimism in the stock.
The Zacks Consensus Estimate for Marcus’ 2017 earnings climbed 10% over the past 60 days. Further, for 2017, EPS is expected to grow 21.3%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
Image: Bigstock
Royal Caribbean (RCL) Strong on Initiatives & Bookings Trend
On May 22, we issued an updated research report on global cruise vacation company Royal Caribbean Cruises Ltd. (RCL - Free Report) .
Last month, the company posted mixed first-quarter 2017 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same. Meanwhile, Royal Caribbean now anticipates earnings in the band of $7 to $7.20 per share for full-year 2017, up from the earlier guided range of $6.90–$7.10.
Notably, this Zacks Rank #2 (Buy) company’s shares have outperformed the Zacks categorized Leisure & Recreation Services industry in the past six months. The stock surged 28.4% outpacing the industry’s gain of 14.5% during the same period.
In fact, the company continues to reflect strength in several areas and is thus expected to continue performing well in the quarters ahead.
Key Growth Drivers
Strong Brand Recognition: Serving over five million passengers annually, Royal Caribbean enjoys significant brand recognition, while its strong relationship with travel agents makes it one of the leading cruise companies in the U.S. Given the strength and diversity of its brands and itineraries, the company has been able to successfully capture potential and repeat cruise vacationers, and enjoys immense popularity among cruisers.
Demand Across Geographies & Capacity Growth: Royal Caribbean has been delivering solid results backed by strong booking trends and capacity growth.
The company’s Asia-Pacific itineraries have been mostly performing strongly over the past few quarters. Indeed, each of the company’s China, Australia and Southeast Asia itineraries are booked higher than last year in load factor. Meanwhile, overall demand for cruising in North America continues to be solid, and the Caribbean and Alaska itineraries are all poised to have a strong year and produce solid yield improvements in 2017.
Furthermore, demand for European sailings has been particularly strong from North America. Consequently, these itineraries are booked at significantly higher average-per-diems (APD) and load factor than same time last year.
In fact, currently, the company’s 2017 itineraries are booked ahead of last year in both occupancy and pricing, with roughly 15% fewer guests left to book than at this point last year.
Given the consistent increase in bookings, the company has been increasing its capacity. The majority of the capacity growth has been recorded in North America, with the remaining mostly in the Asia Pacific region. Additionally, strong booking trends witnessed for new ships launched by the company should further drive growth.
Recently, Celebrity Cruises—one of three brands in the Royal Caribbean family—announced a new category of ship, Edge-class. These ships are dynamic, innovative and beautiful with unique features. Notably, the first ship from the new Edge Class of ships will be Celebrity Edge. We believe this transformational ship is thus poised to attract customers after its launch in Dec 2018.
Reduced Costs Given Profitability Initiatives: Royal Caribbean has been undertaking profitability improvement initiatives aimed at generating long-term cost savings. The company has now entered the final phase of its Double-Double program launched in 2014. We note that that the program has mostly done what it set out to do – bookings are at record levels, dividends are at an all-time high, costs have been well managed and guest satisfaction has improved.
Other initiatives undertaken to reduce costs include carrying out home porting from secondary cities for some of its bigger vessels, improving fuel efficiency of ships to reduce fuel costs and using fuel swaps to mitigate volatility in fuel prices.
Technological Innovation: The company has been deploying technology which includes revamped websites, new vacation packaging capabilities, support for mobile apps, increased bandwidth onboard and streaming WiFi. With busier customers preferring more of digital devices that help to save time, introduction of superior Internet bandwidth, online check-in, radio-frequency identification technology accompanied with the Royal iQ app at Quantum of the Seas, Anthem of the Seas, Ovation of the Seas and Harmony of the Seas should continue to increase occupancy.
Since 2014, the company has added over 1,000 berths, 24 restaurants, seven bars, refreshed its retail spaces fleet wide and added boutiques such as Kate Spade, Michael Kors and Tiffany. All of these add to enhance customer experiences.
Bottom Line
Does this mean that the company has been lying on a bed of roses? Well, not really!
Adverse forex translations, rise in fuel prices along with lingering global uncertainties in certain international markets have been keeping growth at check. Moreover, the company is incurring higher costs for its restructuring initiatives and consolidation efforts of late. Though these efforts are expected to benefit the company over the long run, these would put pressure on margins and earnings in the near term.
Additionally, the company faces competition from other cruise operators including Carnival Corporation (CCL - Free Report) and Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) .
Despite the headwinds, Royal Caribbean is well poised for growth given its strong fundamentals, strong bookings trend and various strategic initiatives.
Notably, over the last 60 days, the Zacks Consensus Estimate for Royal Caribbean’s current quarter’s earnings has moved up 15.6%, reflecting seven upward revisions versus one downward. Also, current year’s earnings estimates have inched up 2.6%, on the back of nine upward revisions versus no downward revision. All these positive earnings estimate revisions testifies the unwavering confidence that analysts have in the company and further adds to the optimism in the stock.
Another top-ranked stock in the industry is The Marcus Corporation (MCS - Free Report) carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Marcus’ 2017 earnings climbed 10% over the past 60 days. Further, for 2017, EPS is expected to grow 21.3%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>