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Royal Caribbean (RCL) or Carnival (CCL): Which is a Better Stock?
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The cruise industry is witnessing a significant surge in bookings for 2024, surpassing pre-COVID levels across various income brackets. The allure of cruises, known for their cost-effectiveness compared with land-based options, remains strong.
The Cruise Lines International Association (CLIA) forecasts that nearly 35.7 million passengers will embark on cruises in 2024, marking an increase from the 31.5 million passengers in 2023. This projection represents a 6% rise from the number of passengers who sailed in 2019.
There's an active drive within the industry to enhance commercial facets, showcasing substantial progress and a steadfast commitment to continuous enhancement. Acknowledging the perpetual scope for improvement, the industry emphasizes refining sales, support and trade relationships, highlighting their pivotal role in securing sustained growth and advancement.
Respective companies are actively striving to minimize differences between cruise and land experiences by upholding outstanding service standards. The emphasis on optimizing fleets and improving guest amenities on newer ships reflects a step in the right direction.
Per the report, the Cruise industry is expected to generate revenues of US$30.11 billion in 2024. By 2028, the market volume is anticipated to reach US$36.67 billion. This represents an annual revenue forecast expansion of 5.05% CAGR (2024-2028). The user base is expected to reach nearly 33.43 million by 2028, showing an increase in user penetration from 0.37% (in 2024) to 0.42% (in 2028). Online sales are expected to contribute around 25% to total revenues by 2028.
However, industry participants are anticipated to suffer the brunt of rising prices, mostly because of an increase in food, fuel and onboard charges. Companies can expect increasing charges for new-to-cruise customers as a result of attempts to close the occupancy gap and an increase in dry-dock days.
Despite the roadblocks, it is worth noting that the Zacks Leisure and Recreation Services industry has had a decent run on the bourses in the past three months. The industry has gained 12.2% in the said time frame compared with the S&P 500’s 8% growth.
Leading cruise companies like Royal Caribbean Group (RCL - Free Report) and Carnival Corporation & plc (CCL - Free Report) have been adopting and deploying strategies to generate profits.
Royal Caribbean’s shares have gained 39% in the past three months, while Carnival’s shares have rallied 36.5%.
Shares of Royal Caribbean are benefiting from solid demand for cruising and acceleration in booking volumes. Also, the emphasis on strong pricing (on closer-in-demand) bodes well. Despite economic uncertainties, the demand for vacations continues to thrive, underpinned by engaged consumers seeking cruise experiences. This favorable sentiment is supported by healthy economic indicators, increased spending on experiences and a growing preference for cruising.
Earnings History and Projected Growth
Royal Caribbean’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an earnings surprise of 28.3%, on average. Royal Caribbean’s earnings for 2024 are expected to increase 38.1%.
Meanwhile, Carnival surpassed estimates in each of the trailing four quarters. It has a trailing four-quarter earnings surprise of 19.2%, on average. Carnival’s earnings for the fiscal 2024 are projected at 98 cents per share compared with breakeven earnings reported in the previous year.
Fundamentals
In 2024, Royal Caribbean foresees substantial growth driven by a robust booking position, fleet expansion, and enhanced commercial capabilities. Their commitment lies in innovating ship designs and onboard experiences to attract and retain customers within their vacation ecosystem. Plans include the introduction of two groundbreaking vessels — Utopia of the Seas for Royal Caribbean International and Silver Array for Silversea — aiming to revolutionize travel experiences.
RCL is strengthening its commercial abilities by refining distribution networks, boosting customer loyalty and curbing acquisition costs. They've witnessed a notable surge in new customer engagement, with around two-thirds of third-quarter guests being newcomers to their brand or cruising. Additionally, the company's focus on simplifying pre-booking processes, mobile app transactions, and increased pre-cruise spending indicates positive trends for future growth and revenue. RCL plans to prioritize operational excellence and business efficiency and leverage platform efficiencies to optimize returns moving forward.
Carnival's recent quarterly results showcased a positive trend in yields, surpassing 2019 levels. The company experienced significant bookings during the Black Friday and Cyber Monday period, marking an all-time high and leading to an exceptional start for 2024 in both pricing and occupancy. Their increased advertising investments have yielded remarkable web visits and search results, significantly surpassing capacity growth. With the majority of the 2024 business secured at notably higher prices, Carnival is looking forward to a promising year.
Increased focus on commercial enhancements, operational efficiency and cost management strategies bode well. CCL is set to unveil new vessels like Carnival Jubilee, Sun Princess and Queen Anne, among others, marking roughly 30% of their capacity with new ships. Projects like Celebration Key and infrastructure improvements in destinations like Half Moon Cay are aimed at enhancing guest experiences. Marketing strategies by various brands (within the Carnival group) are set to further bolster the market presence.
Our Take
Our comparative analysis shows Royal Caribbean has an edge over Carnival in terms of share price appreciation. However, the fundamentals of both companies look solid. Taking all the factors into account, we believe that Royal Caribbean is slightly better positioned than Carnival at the moment.
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Royal Caribbean (RCL) or Carnival (CCL): Which is a Better Stock?
The cruise industry is witnessing a significant surge in bookings for 2024, surpassing pre-COVID levels across various income brackets. The allure of cruises, known for their cost-effectiveness compared with land-based options, remains strong.
The Cruise Lines International Association (CLIA) forecasts that nearly 35.7 million passengers will embark on cruises in 2024, marking an increase from the 31.5 million passengers in 2023. This projection represents a 6% rise from the number of passengers who sailed in 2019.
There's an active drive within the industry to enhance commercial facets, showcasing substantial progress and a steadfast commitment to continuous enhancement. Acknowledging the perpetual scope for improvement, the industry emphasizes refining sales, support and trade relationships, highlighting their pivotal role in securing sustained growth and advancement.
Respective companies are actively striving to minimize differences between cruise and land experiences by upholding outstanding service standards. The emphasis on optimizing fleets and improving guest amenities on newer ships reflects a step in the right direction.
Per the report, the Cruise industry is expected to generate revenues of US$30.11 billion in 2024. By 2028, the market volume is anticipated to reach US$36.67 billion. This represents an annual revenue forecast expansion of 5.05% CAGR (2024-2028). The user base is expected to reach nearly 33.43 million by 2028, showing an increase in user penetration from 0.37% (in 2024) to 0.42% (in 2028). Online sales are expected to contribute around 25% to total revenues by 2028.
However, industry participants are anticipated to suffer the brunt of rising prices, mostly because of an increase in food, fuel and onboard charges. Companies can expect increasing charges for new-to-cruise customers as a result of attempts to close the occupancy gap and an increase in dry-dock days.
Despite the roadblocks, it is worth noting that the Zacks Leisure and Recreation Services industry has had a decent run on the bourses in the past three months. The industry has gained 12.2% in the said time frame compared with the S&P 500’s 8% growth.
Leading cruise companies like Royal Caribbean Group (RCL - Free Report) and Carnival Corporation & plc (CCL - Free Report) have been adopting and deploying strategies to generate profits.
Let’s analyze and find out which firm among Royal Caribbean and Carnival, both carrying a Zacks Rank #3 (Hold) at present, is better positioned right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Image Source: Zacks Investment Research
Royal Caribbean’s shares have gained 39% in the past three months, while Carnival’s shares have rallied 36.5%.
Shares of Royal Caribbean are benefiting from solid demand for cruising and acceleration in booking volumes. Also, the emphasis on strong pricing (on closer-in-demand) bodes well. Despite economic uncertainties, the demand for vacations continues to thrive, underpinned by engaged consumers seeking cruise experiences. This favorable sentiment is supported by healthy economic indicators, increased spending on experiences and a growing preference for cruising.
Earnings History and Projected Growth
Royal Caribbean’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an earnings surprise of 28.3%, on average. Royal Caribbean’s earnings for 2024 are expected to increase 38.1%.
Meanwhile, Carnival surpassed estimates in each of the trailing four quarters. It has a trailing four-quarter earnings surprise of 19.2%, on average. Carnival’s earnings for the fiscal 2024 are projected at 98 cents per share compared with breakeven earnings reported in the previous year.
Fundamentals
In 2024, Royal Caribbean foresees substantial growth driven by a robust booking position, fleet expansion, and enhanced commercial capabilities. Their commitment lies in innovating ship designs and onboard experiences to attract and retain customers within their vacation ecosystem. Plans include the introduction of two groundbreaking vessels — Utopia of the Seas for Royal Caribbean International and Silver Array for Silversea — aiming to revolutionize travel experiences.
RCL is strengthening its commercial abilities by refining distribution networks, boosting customer loyalty and curbing acquisition costs. They've witnessed a notable surge in new customer engagement, with around two-thirds of third-quarter guests being newcomers to their brand or cruising. Additionally, the company's focus on simplifying pre-booking processes, mobile app transactions, and increased pre-cruise spending indicates positive trends for future growth and revenue. RCL plans to prioritize operational excellence and business efficiency and leverage platform efficiencies to optimize returns moving forward.
Carnival's recent quarterly results showcased a positive trend in yields, surpassing 2019 levels. The company experienced significant bookings during the Black Friday and Cyber Monday period, marking an all-time high and leading to an exceptional start for 2024 in both pricing and occupancy. Their increased advertising investments have yielded remarkable web visits and search results, significantly surpassing capacity growth. With the majority of the 2024 business secured at notably higher prices, Carnival is looking forward to a promising year.
Increased focus on commercial enhancements, operational efficiency and cost management strategies bode well. CCL is set to unveil new vessels like Carnival Jubilee, Sun Princess and Queen Anne, among others, marking roughly 30% of their capacity with new ships. Projects like Celebration Key and infrastructure improvements in destinations like Half Moon Cay are aimed at enhancing guest experiences. Marketing strategies by various brands (within the Carnival group) are set to further bolster the market presence.
Our Take
Our comparative analysis shows Royal Caribbean has an edge over Carnival in terms of share price appreciation. However, the fundamentals of both companies look solid. Taking all the factors into account, we believe that Royal Caribbean is slightly better positioned than Carnival at the moment.