With more than 25 million passengers expected to sail this year, as per Cruise Lines International Association (CLIA), 2017 might just prove to be the year for the cruise ships.
In fact, the industry as a whole continues to respond to the desires of today’s travelers through technological advancements as well as via deployment of new ships to new ports and destinations around the world. This, in turn, is resulting in steady growth and strong economic impact around the world. Evidently, 26 new ships have been announced to debut in 2017 for a total investment of more than $6.8 billion in new ocean vessels, as of Dec 2016.
Industry insiders too expect demand for cruise ships to remain strong throughout this year, thereby making it the right time to add a few cruise companies to your portfolio. Miami-based, Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) , one of the major players in the cruise segment, is one stock which is worth considering.
What Makes Norwegian Cruise Line a Solid Pick?
Stock Price Movement: Norwegian Cruise Line shares have rallied 17% in the last six months outperforming the Zacks categorized Leisure and Recreation Services industry’s gain of 15.8%. Given increasing demand for business and leisure travel, along with the current strength in its bookings and capacity growth, the stock should keep performing well in the quarters ahead.
Earnings & Revenue Growth: Arguably, nothing is more important than earnings growth as surging profit levels is often an indication of strong prospects (and stock price gains) for the company in question.
While Norwegian Cruise Line has a historical earnings per share (EPS) growth rate of 17.8%, investors should really focus on its projected growth. Here, the company is looking to grow at a rate of 22%, higher than the industry average of 14.3%.
Propelling the earnings forward is the company’s solid revenue growth story. Evidently, its last five years revenue growth is 21.9% better than the industry’s average of 5.3%. Moreover, projected sales growth for the current year is 8.7%, which is higher than the broader industry’s estimate of 5%.
Favorable ROE: Norwegian Cruise Line’s trailing 12-month return on equity (ROE) supports its growth potential. Also, the company’s ROE of 16.76% has increased over the years. Further, it compares favorably with the Zacks categorized Leisure and Recreation Services industry’s ROE of 12.10%, reflecting the fact that it is efficient in using shareholders’ funds.
Positive Estimate Revisions: The Zacks Consensus Estimate for Norwegian Cruise Line’s current quarter earnings has moved up over 1%, reflecting one upward revision versus none downward, over the last 60 days. Also, current year’s earnings estimates have climbed 0.3%, on the back of one upward revision versus no downward revision. All these positive earnings estimates revision testifies the unwavering confidence that analysts have in the company and substantiate the Zacks Rank #2 (Buy) for the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
VGM Score: Norwegian Cruise Line has a VGM Score of 'A'. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of 'A' or 'B' when combined with a Zacks Rank #1 or 2 make solid investment choices.
Adverse forex translations, an increase in fuel prices, along with lingering global uncertainties in certain international markets may prove detrimental to the company’s growth prospects. Besides, Norwegian Cruise Line also faces competition from other large cruise operators including Royal Caribbean Cruises Ltd. (RCL - Free Report) and Carnival Corporation (CCL - Free Report) .
Nonetheless, given the company’s strong fundamentals, strong bookings trend and burgeoning demand for cruise travel in 2017, the stock should keep performing well in the near term, thereby making it a top investment choice.
Another top-ranked stock in the same sector is Cedar Fair, L.P. (FUN - Free Report) sporting a Zacks Rank #1. The Zacks Consensus Estimate for Cedar Fair’s current quarter earnings moved up nearly 1%, over the past 60 days. Further, for 2017, its EPS is expected to grow 12.7%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>