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Royal Caribbean (RCL) Up 27% in Six Months: Right Time to Buy?
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Shares of Royal Caribbean Cruises Ltd. (RCL - Free Report) have rallied 26.9% in the past six months compared with the Zacks Leisure and Recreation Services industry’s rise of 6.8%. The company continues to sail effortlessly, courtesy of its improvement in commercial operations, strategic reallocating of portfolio composition and new ship additions.
RCL is also benefiting from a strong booking and pricing environment and strength in onboard spending. Despite disruptions at Eastern Mediterranean sailings, the stock outperformed its peers, including Carnival Corporation & plc (CCL - Free Report) , Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) and OneSpaWorld Holdings Limited (OSW - Free Report) .
Royal Caribbean's strategic vision and execution capabilities position it well to continue delivering exceptional value to shareholders.
Image Source: Zacks Investment Research
Factors Acting in Favor of Royal Caribbean
Royal Caribbean has been benefiting from solid booking volumes concerning all key itineraries. During first-quarter 2024, the company stated a rise in consumer spending onboard and pre-cruise purchases. It continues to be in a record-booked position, surpassing prior-year levels, courtesy of greater participation at higher prices. In first-quarter 2024, load factors were 107%. The company is highly optimistic about the demand and pricing landscape for 2024.
Considering the $1.9-trillion vacation market, the company is returning to the high-yielding China market with Spectrum of the Seas and adding Ovation of the Seas to Tianjin in 2025. The strategic move reinstates RCL's footprint in key global markets. The initiative enables it to attract high-quality demand from new customer segments.
Royal Caribbean's innovative and differentiated ships, such as the Icon of the Seas and the upcoming Utopia of the Seas and Silver Ray, are setting new standards in the industry. The new ships are witnessing strong demand and high guest satisfaction, boosting RCL’s financial performance. The company's private destinations, including the newly-announced Royal Beach Club in Cozumel and the groundbreaking Royal Beach Club Paradise Island in Nassau, make an initiative placed in the right direction.
Royal Caribbean is enhancing its commerce platform with new technology and artificial intelligence (AI) to improve the experience across various distribution channels, build stronger customer loyalty and reduce guest acquisition costs. The company is investing in a modern digital travel platform to streamline travel planning, making it easier for guests to book vacations and expand wallet share. The company anticipates the initiatives to translate into higher onboard spend and increased revenues.
Estimates Moving Up
RCL expects its 2024 earnings per share (EPS) in the range of $10.70-$10.90, up from the prior projection of $9.50-$9.70. The Zacks Consensus Estimate for RCL’s 2024 and 2025 EPS has moved up 2.8% and 2.6%, respectively, in the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
Returns Higher Than the Industry
Royal Caribbean’s return on invested capital (ROIC) has outperformed the industry average in the trailing 12 months. ROIC of RCL was 14.61% compared with the industry average of 7.45%.
The company’s impressive ROIC is a testament to its effective capital allocation, strategic market positioning and operational efficiency. Given the increased focus on innovative growth, cost control and sustainable investments, it is well-positioned to maintain high returns on invested capital. Strength in ROIC underscores RCL’s financial health and value-creating potential.
Image Source: Zacks Investment Research
RCL’s trailing 12-month return on equity is 51.5%, ahead of the industry average of 12.97%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds in its operations to generate income.
Image Source: Zacks Investment Research
Valuation
With a forward 12-month price-to-earnings of 13.07X, which is well below the industry average of 16.6X, the stock presents a potentially attractive valuation for investors.
Image Source: Zacks Investment Research
Technical indicators are supportive of RCL's performance. The stock is currently trading above both its 50-day and 200-day moving averages, indicating robust upward momentum and price stability.
Image Source: Zacks Investment Research
Time to Stock Up
Royal Caribbean presents a compelling investment opportunity driven by strong operational performance, strategic market expansions, and innovative product offerings. The company's robust booking volumes, enhanced onboard spending and significant ROIC underscore its ability to capitalize on increasing travel demand. With a favorable valuation compared with industry peers and upwardly revised earnings projections, RCL is well-positioned to deliver sustained growth and shareholder value. We believe that the Zacks Rank #2 (Buy) stock is an ideal candidate for investors' portfolio addition.
Image: Bigstock
Royal Caribbean (RCL) Up 27% in Six Months: Right Time to Buy?
Shares of Royal Caribbean Cruises Ltd. (RCL - Free Report) have rallied 26.9% in the past six months compared with the Zacks Leisure and Recreation Services industry’s rise of 6.8%. The company continues to sail effortlessly, courtesy of its improvement in commercial operations, strategic reallocating of portfolio composition and new ship additions.
RCL is also benefiting from a strong booking and pricing environment and strength in onboard spending. Despite disruptions at Eastern Mediterranean sailings, the stock outperformed its peers, including Carnival Corporation & plc (CCL - Free Report) , Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) and OneSpaWorld Holdings Limited (OSW - Free Report) .
Royal Caribbean's strategic vision and execution capabilities position it well to continue delivering exceptional value to shareholders.
Image Source: Zacks Investment Research
Factors Acting in Favor of Royal Caribbean
Royal Caribbean has been benefiting from solid booking volumes concerning all key itineraries. During first-quarter 2024, the company stated a rise in consumer spending onboard and pre-cruise purchases. It continues to be in a record-booked position, surpassing prior-year levels, courtesy of greater participation at higher prices. In first-quarter 2024, load factors were 107%. The company is highly optimistic about the demand and pricing landscape for 2024.
Considering the $1.9-trillion vacation market, the company is returning to the high-yielding China market with Spectrum of the Seas and adding Ovation of the Seas to Tianjin in 2025. The strategic move reinstates RCL's footprint in key global markets. The initiative enables it to attract high-quality demand from new customer segments.
Royal Caribbean's innovative and differentiated ships, such as the Icon of the Seas and the upcoming Utopia of the Seas and Silver Ray, are setting new standards in the industry. The new ships are witnessing strong demand and high guest satisfaction, boosting RCL’s financial performance. The company's private destinations, including the newly-announced Royal Beach Club in Cozumel and the groundbreaking Royal Beach Club Paradise Island in Nassau, make an initiative placed in the right direction.
Royal Caribbean is enhancing its commerce platform with new technology and artificial intelligence (AI) to improve the experience across various distribution channels, build stronger customer loyalty and reduce guest acquisition costs. The company is investing in a modern digital travel platform to streamline travel planning, making it easier for guests to book vacations and expand wallet share. The company anticipates the initiatives to translate into higher onboard spend and increased revenues.
Estimates Moving Up
RCL expects its 2024 earnings per share (EPS) in the range of $10.70-$10.90, up from the prior projection of $9.50-$9.70. The Zacks Consensus Estimate for RCL’s 2024 and 2025 EPS has moved up 2.8% and 2.6%, respectively, in the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
Returns Higher Than the Industry
Royal Caribbean’s return on invested capital (ROIC) has outperformed the industry average in the trailing 12 months. ROIC of RCL was 14.61% compared with the industry average of 7.45%.
The company’s impressive ROIC is a testament to its effective capital allocation, strategic market positioning and operational efficiency. Given the increased focus on innovative growth, cost control and sustainable investments, it is well-positioned to maintain high returns on invested capital. Strength in ROIC underscores RCL’s financial health and value-creating potential.
Image Source: Zacks Investment Research
RCL’s trailing 12-month return on equity is 51.5%, ahead of the industry average of 12.97%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds in its operations to generate income.
Image Source: Zacks Investment Research
Valuation
With a forward 12-month price-to-earnings of 13.07X, which is well below the industry average of 16.6X, the stock presents a potentially attractive valuation for investors.
Image Source: Zacks Investment Research
Technical indicators are supportive of RCL's performance. The stock is currently trading above both its 50-day and 200-day moving averages, indicating robust upward momentum and price stability.
Image Source: Zacks Investment Research
Time to Stock Up
Royal Caribbean presents a compelling investment opportunity driven by strong operational performance, strategic market expansions, and innovative product offerings. The company's robust booking volumes, enhanced onboard spending and significant ROIC underscore its ability to capitalize on increasing travel demand. With a favorable valuation compared with industry peers and upwardly revised earnings projections, RCL is well-positioned to deliver sustained growth and shareholder value. We believe that the Zacks Rank #2 (Buy) stock is an ideal candidate for investors' portfolio addition.
You can see the complete list of today’s Zacks #1 Rank stocks here.